The Technical Indicator: Charting a headline breakout attempt, S&P 500 nails major resistance (2,954)

Against this backdrop, the S&P 500 has once again nailed major resistance (2,954) reaching its third test in as many weeks. Significant overhead is frequently cleared on the third or fourth independent test, making the current approach potentially consequential.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.03% hourly chart highlights the past two weeks.

As illustrated, the S&P has knifed to the range top, rising to challenge major resistance (2,954), detailed repeatedly.

Monday’s close (2,953.9) matched resistance, and the retest remains underway.

Similarly, the Dow Jones Industrial Average DJIA, -0.36% has knifed to its range top, punctuating a sharp reversal from the May low.

Tactically, the index has thus far balked at resistance matching the June low (24.680) an area also detailed on the daily chart.

Conversely, the breakout point (24,382) pivots to first support. Tuesday’s early session low (24,376) has roughly matched support.

Against this backdrop, the Nasdaq Composite COMP, +0.58% has also rallied to the range top.

The prevailing upturn punctuates a successful test of major support (8,705), detailed repeatedly.

Last week’s low (8,705.2) matched support, an area also illustrated below.

The Nasdaq has subsequently spiked to positive year-to-date territory, rising comfortably atop the 2019 close (8,972).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq nailed major support (8,705) to punctuate last week’s three-day downturn spanning as much as 5.9%.

The successful retest preserves a bullish near- to intermediate-term bias. (The Nasdaq has not closed under its 20-day moving average since April 3.)

More distant overhead spans from 9,300 to 9,323, levels matching the bottom of the February gaps. The second February gap (9,323) punctuated the Nasdaq’s initial technical breakdown, and a bearish island reversal.

Looking elsewhere, the Dow industrials’ backdrop remains incrementally softer.

Still, the blue-chip benchmark has rallied respectably from its 50-day moving average. The successful retest preserves a bullish intermediate-term bias.

On further strength, major resistance matches the June 2019 low (24,680) and the February 2020 low (24,681).

Similarly, the S&P 500 has reversed sharply from the May low, placing major resistance (2,954) under siege.

Monday’s close (2,953.9) matched resistance, and a potentially consequential retest remains underway.

The bigger picture

As detailed above, the major U.S. benchmarks have weathered last week’s mid-month market downdraft.

In the process, each index has rallied sharply from the May low, rising to challenge 10-week highs. Bullish price action.

Moving to the small-caps, the iShares Russell 2000 ETF has reversed sharply from a successful test of its 50-day moving average.

The small-cap benchmark has tagged a month-to-date peak. On further strength, gap resistance (136.17) is closely followed by the April peak (136.85).

Similarly, the SPDR S&P MidCap 400 ETF has rallied sharply from its 50-day moving average. The prevailing upturn has been fueled by a volume spike.

Against this backdrop, the SPDR Trust S&P 500 has registered a bullish reversal from the May low, closely matching support.

The upturn has been punctuated by a 10-week high, the SPY’s best level since March 6. The 200-day moving average, currently 299.44, is increasingly within view.

Moving to the four-year view, the S&P 500 has asserted a nearly one-month range.

The range top is defined by major resistance (2,954), detailed repeatedly. (See for instance, the April 28 review.)

Recall that Monday’s close (2,953.9) matched the inflection point.

Conversely, the range bottom matches the 50% retracement of the 2020 crash (2,793). The S&P has not closed under the retracement since April 21. (Also see the hourly chart.)

Placing a finer point on the S&P 500, the index has asserted a jagged four-week range, digesting a sharp reversal off the March low.

Recall the initial rally to the April peak (2,954.86) spanned 763 points, or 34.8%.

The subsequent range, still in play, is a bullish continuation pattern, capped by major resistance (2,954). The current approach marks the S&P’s third test, and major resistance is frequently cleared on the third of fourth test.

Tactically, eventual follow-through likely opens the path to the 200-day moving average, currently 2,998, a level that has capped the S&P since March 5.

More broadly, an intermediate-term target projects from the May range to the 3,115 area, slightly under the March peak (3,131).

Beyond specific levels, last week’s bullish reversal — and this week’s sharp follow-through — preserves the S&P’s prevailing range, and a bullish intermediate-term bias. The ongoing retest of the 2,954 resistance — potentially across the next several sessions — will also likely add color.

Also see: Charting a grinding-higher May rally, S&P 500 approaches major resistance.

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 10-year Treasury note yield TNX, -4.83% has flatlined in recent weeks, digesting the massive 2020 plunge to record lows.

Still, the yield has shown signs of life this week, closing Monday atop the 50-day moving average, currently 0.72 — a widely-tracked intermediate-term trending indicator — for the first time since January.

Against this backdrop, the yield’s 20-day Bollinger bands have tightened, positioning it for potentially swift follow-through on a breakout. As always, the Bollinger bands encompass two standard deviations of the yield’s trailing 20-day volatility.

Monday’s close marked the yield’s first 2020 close atop the upper volatility band.

On further strength, gap resistance (0.79) has capped the yield since late March. A close atop this area opens the path to a much less-charted patch — see the weekly chart — and potentially material upside follow-through.

Moving to specific sectors, the Energy Select Sector SPDR is acting well technically amid recently firming crude-oil prices.

Late last month, the group knifed to a higher plateau, reclaiming resistance closely matching the 50-day moving average. The upturn punctuated a bullish cup-and-handle defined by the March and April lows.

More immediately, the orderly May range is a continuation pattern, laying the groundwork for potential upside follow-through. Tactically, a well-defined floor matches the breakout point (35.00), and the group’s recovery attempt is intact barring a violation.

Initially profiled April 14, Netflix, Inc. NFLX, +0.04% has returned 9.4% and remains well positioned.

As illustrated, the shares initially spiked five weeks ago, staging a nearly straightline April spike to record territory. The upturn resolved a bullish V-shaped reversal from the March low.

The ensuing pullback has been underpinned by trendline support, and punctuated by a May rally to challenge record highs. An intermediate-term target projects to the 490 area (almost precisely 490) on follow-through.

More broadly, the shares remain well positioned on the three-year chart, rising from a massive double bottom defined by the 2019 and 2020 lows.

Applied Materials, Inc. AMAT, +3.95% is a large-cap chip equipment name showing signs of life. The shares have whipsawed amid a volume spike after the company’s quarterly results, released Thursday.

Technically, the shares started May with a trendline breakout, rising to challenge the 200-day moving average, currently 54.10.

Underlying the upturn, its relative strength index (not illustrated) has recently registered three-month highs — but remains in neutral territory — improving the chances of eventual follow-through.

Tactically, a breakout attempt is in play barring a violation of the prevailing range bottom (50.75).

Finally, Seattle Genetics, Inc. SGEN, -0.01% — initially profiled April 6 — has returned 27.7% and remains well positioned.

Earlier this month, the shares knifed to record highs, rising after the company’s quarterly results, released April 30.

The subsequent flag pattern is pinned to the steep April rally, positioning the shares to build on the initial strong-volume spike. Tactically, gap support (155.90) has underpinned the May range, and a sustained posture higher signals a comfortably bullish bias.

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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.