The Technical Indicator: Charting a bullish 2020 start: S&P 500 extends break to record territory

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Technically speaking, the major U.S. benchmarks continue to take flight as the early-January volatility spike fades.

Against this backdrop, the S&P 500 and Nasdaq Composite have registered their latest record highs, as the slightly lagging behind Dow industrials continue to press the 29,000 mark.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.12%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its rally to record territory, rising from a successful test of its breakout point (3,258).

More broadly, the prevailing upturn originates from familiar support (3,215) closely matching the December gap.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.48%  has not extended its breakout.

Still, its near-term backdrop remains comfortably bullish. The index has pulled in modestly from record highs after briefly tagging the 29,000 mark.

Tactically, a near-term floor (28,872) is followed by an inflection point matching the 2019 peak (28,701).

True to recent form, the Nasdaq Composite’s COMP, +0.15%  near-term backdrop remains the strongest.

The index has registered a record close across three of the prior four sessions, outpacing the other benchmarks.

Tactically, near-term support (9,158) is followed by the breakout point (9,093) and the deeper 2019 peak (9,052).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq continues to take flight. The prevailing leg higher punctuates a jagged 2020 start, a downturn that filled the early-year gap.

More broadly, the chart illustrates a powerful two-month uptrend, punctuated by shallow and short-lived pullbacks. Tactically, a notable floor spans from about 8,909 to 8,943, levels matching the late-December and January lows.

Looking elsewhere, the Dow Jones Industrial Average is pressing the 29,000 mark.

Recall that the prevailing upturn originates from the Dow’s first notable support. The late-December low (28,376) closely matched gap support (28,381) punctuating a successful retest.

Delving deeper, the 50-day moving average is rising toward the former breakout point (28,175). The Dow’s intermediate-term bias remains bullish barring a violation of this area.

Meanwhile, the S&P 500 has extended its latest break to previously uncharted territory.

Here again, the prevailing upturn originates from gap support (3,215). The month-to-date low (3,214.6), established last week, has matched the inflection point.

The bigger picture

Collectively, the major U.S. benchmarks are off to a strong 2020 start.

Each index has confirmed its primary uptrend, breaking relatively decisively to record territory in the wake of early-month volatility.

Against this backdrop, the S&P 500 has already registered a bullish 1.8% breakout versus the 2019 close.

Moving to the small-caps, the iShares Russell 2000 ETF has not extended its uptrend.

Nonetheless, the small-cap benchmark has sustained its December break to 52-week highs. Tactically, resistance matches the 2019 peaks, an area spanning from 166.68 to 167.12.

Also recall that the so-called “January effect” — a seasonal rotation toward small-caps — has not surfaced to this point. To the contrary, large-cap technology has disproportionately contributed to early-year gains.

Similarly, the SPDR S&P MidCap 400 ETF has registered a sluggish 2020 start.

Still, the MDY has maintained its breakout point (370.50) preserving a firmly-bullish backdrop. The 50-day moving average is rising toward support.

Looking elsewhere, the SPDR Trust S&P 500 has extended its break to record territory.

Tactically, the 20-day moving average, currently 322.90, remains an inflection point. Delving deeper, a familiar floor matches the late-December low (320.15), detailed previously, and the month-to-date low (320.36).

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

To start, recall that the S&P has already registered a 1.8% breakout (on a closing basis) versus the 2019 close. The decisive follow-through, amid recent geopolitical tensions, is constructive.

Also consider that the prevailing upturn originates from the S&P’s first significant floor (3,215), detailed repeatedly. The January low (3,214.6) has matched support.

Tactically, a near-term target closely matches the 3,300 mark, detailed previously, and is increasingly within view.

Conversely, the 20-day moving average, currently 3,236, is followed by support matching the January low (3,215). The S&P has registered just one close under the 20-day average — a widely-tracked near-term trending indicator — since Oct. 11.

An eventual violation of this area would raise a near-term question mark.

Delving deeper, a notable floor matches the 50-day moving average, currently 3,163, and the December breakout point (3,154). The S&P 500’s intermediate-term bias remains bullish barring a violation of these areas.

Beyond technical levels, the U.S. benchmarks’ response to fourth-quarter earnings season, set to start this week, will likely add color.

Also see: Charting a jagged 2020 start, S&P 500 nails first 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 iShares MSCI Emerging Markets ETF EEM, -0.62%  is acting well technically. (Yield = 2.1%.)

As illustrated, the shares have knifed to 19-month highs, rising from a relatively tight three-week range. The prevailing upturn originates from trendline support, as well as the 50- and 200-day moving averages, at the December low.

More broadly, the shares are also well positioned on the three-year chart, rising from a massive double bottom defined by the 2018 and 2019 lows. Tactically, trendline support tracks the 50-day moving average and is rising toward a longer-term floor in the 44.00-to-44.50 area. A sustained posture atop the trendline supports a firmly bullish bias.

Moving to U.S. sectors, the SPDR S&P Homebuilders ETF is showing signs of life.

Specifically, the group has rallied to a well-defined range top, tagging a nearly two-year closing peak.

The upturn comes from an unusually tight three-month range — a coiled spring — laying the groundwork for a potentially decisive breakout. A near-term target projects to the 48 area on follow-through.

Conversely, the 50-day moving average is closely followed by the range bottom (45.00) and a breakout attempt is in play barring a violation.

Moving to specific names, Netflix, Inc. NFLX, +0.22%  is a well positioned large-cap name.

The shares concluded 2019 with a steep rally from trendline support, rising to reclaim the 200-day moving average. The subsequent tight range is a continuation pattern, positioning Netflix to build on the December resurgence.

Tactically, resistance spans from about 336.50 to 342.00 and is currently under siege. A near-term target projects to the 360 area on follow-through.

Conversely, a near-term floor matches the 200-day moving average, currently 323.65, and a breakout attempt is intact barring a violation. (Also notice the pending golden cross, or bullish 50-day/200-day moving average crossover.)

The company’s quarterly results are due out Jan. 21.

Initially profiled Oct. 15 — amid the break atop trendline resistance — Skyworks Solutions, Inc. SWKS, -0.18%  has returned 43.7% and remains well positioned.

Technically, the shares have edged to record territory, rising from a flag pattern pinned to the steep December rally. A near-term target projects to the 129 area on follow-through.

Conversely, the 20-day moving average, currently 119.50, has defined the recent trend. A sustained posture higher supports a comfortably bullish bias.

More broadly, the shares are well positioned on the three-year chart, rising from a bullish continuation pattern pinned to the nearly straightline late-2019 rally.

Finally, Pfizer, Inc. PFE, +1.38%  is a Dow 30 component showing signs of life technically. (Yield = 3.8%.)

As illustrated, the shares have tagged a fractional five-month high, edging atop the 200-day moving average.

The upturn comes from a tight range, laying the groundwork for potentially more decisive follow-through. Tactically, trendline support is closely followed by the 50-day moving average, currently 38.34, and Pfizer’s recovery attempt is intact barring a violation.

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.