The Technical Indicator: Bull trend intact: S&P 500 absorbs December whipsaw

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Technically speaking, the U.S. benchmarks’ bull trend has absorbed a respectable early-December market downdraft.

Against this backdrop, the S&P 500 has sustained a sharp reversal from one-month lows, and the prevailing selling pressure near record territory remains flat.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.04%  hourly chart highlights the past two weeks.

As illustrated, the S&P has reversed sharply from the December low. The initial pullback from the range top has been flat, underpinned by the top of the gap (3,135).

On further weakness, a near-term floor (3,119) is followed by the firmer 3,100 area.

Similarly, the Dow Jones Industrial Average DJIA, +0.00%  has reversed sharply from one-month lows.

Tactically, additional overhead matches the mid-November peak (28,090) and is followed by the Dow’s record high (28,175).

Conversely, near-term support (27,900) is followed by the 27,774 inflection point, an area also detailed on the daily chart.

Meanwhile, the Nasdaq Composite COMP, +0.17%  has also registered a bullish reversal.

Against this backdrop, the index has broken from a previously tight range — the 8,540-to-8,590 area — though it remains capped by next resistance (8,660).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has absorbed a downdraft from its intermediate-term target (8,700), detailed repeatedly.

Conversely, the index has maintained first support around the 8,500 mark on a closing basis. Constructive price action.

More broadly, the November breakout punctuated a double bottom defined by the August and October lows. The Nasdaq’s intermediate-term bias remains bullish barring a violation of the breakout point (8,339), an area roughly matching the ascending 50-day moving average.

Looking elsewhere, the Dow Jones Industrial Average has weathered a more aggressive December downdraft.

Consider that last week’s bullish reversal punctuated a shaky, but successful, test of major support (27,400), preserving a bullish intermediate-term bias.

The blue-chip benchmark has subsequently followed through, reaching a higher plateau underpinned by the 27,774 inflection point. (The top of the early-December gap (27,782) closely matches support.)

Meanwhile, the S&P 500 has knifed within view of record territory.

The prevailing upturn punctuates a brief whipsaw under the 3,100 mark, a move defining a small island reversal at the low.

The bigger picture

Collectively, the U.S. benchmarks’ bull trend has absorbed a respectable early-December market downdraft.

Each index has reversed sharply from the December low, rising within striking distance of record highs.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +0.05%  has effectively nailed major support (158.00).

The December low (158.10) closely matched support, and the small-cap benchmark has subsequently knifed to a fractional 52-week high. This is the lone widely-tracked U.S. benchmark to surpass the November peak.

Also recall that the late-November breakout registered distinctly bullish, punctuated by consecutive closes atop the 20-day Bollinger bands.

Meanwhile, the SPDR S&P MidCap 400 ETF has staged its second break from the November range.

The December peak (370.36) has thus far registered fractionally under the MDY’s 52-week high (370.54). A jagged late-year breakout attempt remains underway.

Looking elsewhere, the SPDR Trust S&P 500 has extended a rally from support around 307.00, detailed repeatedly. (See for instance, the Nov. 20 review.)

Here again, the December low (307.13) closely matched support. The prevailing upturn places the SPY’s record peak (315.48) within view.

Placing a finer point on the S&P 500, its late-year backdrop remains bullish and relatively straightforward.

From current levels, gap support (3,119) is followed by the 3,100 mark, an area that remains its first notable floor.

Delving deeper, the December low (3,070) marks notable support, a level underpinning last week’s bull hammer and small island reversal.

Slightly more broadly, the ascending 50-day moving average, currently 3,049, is followed by major support at the 3,028 breakout point. As detailed repeatedly, the S&P’s intermediate-term bias remains bullish barring a violation of this area.

Beyond technical levels, the U.S. sub-sector backdrop remains bullish, as detailed last week.

Also see: Charting a bearish December start, S&P 500 ventures under major support.

Tuesday’s Watch List

The charts below detail names that are technically well positioned. These are radar screen names — sectors or stocks poised to move in the near term. For the original comments on the stocks below, see The Technical Indicator Library.

Drilling down further, the SPDR S&P Retail ETF is acting well technically. (Yield = 1.5%.)

As illustrated, the group has asserted a six-week range, digesting a rally to seven-month highs. The chart details a continuation pattern, recently underpinned by the 200- and 50-day moving averages.

Tactically, a well-defined floor matches the range bottom, circa 43.00, and the group’s intermediate-term bias remains bullish barring a violation.

More broadly, the group is well positioned on the two-year chart, pressing the 100-week moving average from a bullish continuation pattern. Notice the September break atop a one-year downtrend, signaling a trend shift that remains in play.

Moving to specific names, Starbucks Corp. SBUX, -0.12%  is a large-cap name showing signs of life. (Yield = 1.9%.)

Technically, the shares have recently cleared trendline resistance, and the 50-day moving average, raising the flag to a trend shift.

Underlying the upturn, its relative strength index (not illustrated) has tagged its best levels since August, improving the chances of incremental follow-through.

Tactically, the upturn punctuates an extended test of the 200-day moving average, currently 83.60, and Starbucks’ recovery attempt is intact barring a violation.

Bristol-Myers Squibb Co. BMY, +1.43%  is a large-cap pharmaceutical name taking flight. (Yield = 2.9%.)

The shares initially spiked six weeks ago, staging a late-October gap higher after the company’s quarterly results.

More immediately, the shares have followed through, knifing to 52-week highs from an orderly one-month range. Though near-term extended, and due to consolidate, a pullback toward the breakout point (58.80) would offer an attractive entry.

On Semiconductor Corp. ON, +1.10%  is a well positioned large-cap name.

As illustrated, the shares have asserted a six-week range atop the major moving averages, digesting the late-October earnings-fueled breakout.

The prevailing upturn places a seven-month range top under siege. Tactically, a breakout attempt is in play barring a violation of near-term support, circa 21.20.

Also consider that a golden cross, or bullish 50-day/200-day moving average crossover, has signaled this week.

Finally, Nordstrom, Inc. JWN, -0.23%  is a large-cap retailer coming to life. (Yield = 3.8%.)

Late last month, the shares gapped atop the 50- and 200-day moving averages, rising after the company’s third-quarter results.

The subsequent tight range is a continuation pattern, positioning the shares to build on the initial strong-volume spike. Tactically, the top of the gap (36.40) has underpinned the prevailing range, and a breakout attempt is in play barring a violation.

Here again, notice the recent golden cross, or bullish 50-day/200-day moving average crossover, signaling that the intermediate-term uptrend has overtaken the longer-term trend.

Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.

Still well positioned

The table below includes names recently profiled in The Technical Indicator that remain well positioned. For the original comments, see The Technical Indicator Library.