The Technical Indicator: Charting a rally to ‘clear skies’ territory: S&P 500, Nasdaq extend summer breakouts

Against this backdrop, the S&P 500 and Nasdaq Composite have tagged their latest record highs to start September, extending breaks to previously uncharted territory.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.33% hourly chart highlights the past two weeks.

As illustrated, the S&P has sustained a break to record highs. Tactically, an inflection point closely matches the 3,500 mark.

Conversely, near-term support is not well-defined, though the 3,468 and 3,444 areas mark potential inflection points.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.26% has pulled in from six-month highs.

Tactically, the 2019 close (28,538) marks an inflection point, a level defining positive year-to-date territory.

Delving slightly deeper, a notable floor matches the February gap (28,403).

Against this backdrop, the Nasdaq Composite COMP, +0.98% continues to take flight.

Its persistent breakout has tracked atop the 20-hour moving average, the hallmark of a powerful trend.

Tactically, last week’s high (11,730) marks a near-term floor. Deeper inflection points match the late-August gap — 11,507 and 11,468.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has knifed decisively to record territory, rising within striking distance of the 12,000 mark.

The index first tagged the 11,000 mark on Aug. 5, less than one month ago.

More broadly, the prevailing leg higher has marked a two standard breakout, encompassing a lone close atop the 20-day Bollinger bands. As always, consecutive closes atop the bands are more definitively longer-term bullish.

Tactically, the Nasdaq remains near-term extended, and due a cooling-off period. (See the Nasdaq’s early-August breakout — encompassing four straight closes atop the 20-day volatility bands — and subsequent flat pullback.)

But more importantly, the Nasdaq’s primary uptrend has been confirmed with the nearly straightline August spike.

Looking elsewhere, the Dow Jones Industrial Average is digesting a rally to six-month highs.

The prevailing upturn punctuates a mid-August flag pattern, underpinned by the former breakout point (27,580).

On further strength, more distant overhead matches the top of the February gap (28,892).

Meanwhile, the S&P 500 has knifed to record highs, rising slightly atop the 3,500 mark.

Like the Nasdaq, the S&P’s decisive late-August spike marked a two standard deviation breakout, encompassing a lone close atop the 20-day volatility bands.

Separately, consider that the August close (3,500) matched a projected target from the June range (3,501), detailed previously.

The bigger picture

As detailed above, the major U.S. benchmarks have taken flight, staging technically significant summer breakouts.

In the process, the S&P 500 and Nasdaq Composite have just concluded their best August performance in 36 years.

Moving to the small-caps, the iShares Russell 2000 ETF remains in consolidation mode.

Still, the small-cap benchmark has maintained trendline support. The prevailing tight range is a bullish continuation pattern, hinged to the steep early-August rally. (See the tight late-July range, and upside follow-through.)

Meanwhile, the SPDR S&P MidCap 400 ETF continues to press its range top. A prolonged test of the June peak (355.23) remains underway.

Last week’s high (355.26) matched resistance.

Looking elsewhere, the SPDR Trust S&P 500 has knifed to all-time highs.

The prevailing upturn punctuates a tight mid-August range — a coiled spring — though it has been fueled by lukewarm volume.

Placing a finer point on the S&P 500, the index taken flight.

More directly, the S&P has staged a bullish 3.4% late-August breakout, confirming its primary uptrend.

When or if the index pulls in, near-term support is not well-defined. Tactically, the top of last week’s gap (3,413) is closely followed by the firmer breakout point — the 3,393-to-3,400 area.

Beyond technical levels, the S&P 500 remains near-term extended, and due to consolidate at some point. Its more important bigger-picture backdrop has strengthened in recent weeks, and remains firmly-bullish.

Also see: Charting a bullish technical tilt, S&P 500 breaks to record territory.

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 Health Care Select Sector SPDR is acting well technically. (Yield = 2.3%.)

As illustrated, the group has tagged a nominal all-time high, edging atop well-defined resistance. The prevailing upturn punctuates a tight six-week range — a coiled spring — laying the groundwork for potentially more decisive follow-through.

Tactically, the 50-day moving average closely matches the former range bottom (104.60). A breakout attempt is in play barring a violation.

More broadly, the group is well positioned on the three-year chart, building on a massive early-2020 V-shaped reversal.

Looking elsewhere, the iShares U.S. Real Estate ETF has reached a key technical test. (Yield = 3.4%.)

Specifically, the group is pressing its 200-day moving average, currently 83.35, a widely-tracked longer-term trending indicator. The prevailing upturn punctuates a tight one-month range.

Conversely, the ascending 50-day moving average, currently 80.35, has underpinned the tepid summer price action. The group’s breakout attempt is intact barring a violation.

Initially profiled July 23, Advanced Micro Devices, Inc. AMD, +0.58% has returned 47.0% and remains well positioned.

The shares concluded July with a gap to record territory, rising after the company’s quarterly results.

More immediately, the shares have extended the uptrend, rising amid optimism over the weekend launch of a new processor. Tactically, the breakout point (86.70) pivots to support.

Conversely, an intermediate-term target projects to the 97.00 area on follow-through.

Splunk, Inc. SPLK, +1.73% is a well positioned large-cap software vendor.

Late last month, the shares knifed to record territory, rising amid a volume spike after the company’s quarterly results. An intermediate-term target projects to the 244 area.

Conversely, the breakout point (217.30) is followed by deeper gap support (209.15). A sustained posture higher signals a firmly-bullish bias.

Beyond Meat, Inc. BYND, -0.73% is a large-cap name coming to life.

Technically, the shares have recently cleared trendline resistance, rising after an analyst upgrade. The strong-volume upturn has been punctuated consecutive closes atop the 50-day moving average.

On further strength, additional overhead matches the August peak (142.50). Follow-through higher would mark a “higher high” confirming the recent trend shift.

Conversely, the top of the gap (128.80) is closely followed by trendline support, circa 127.00. The prevailing recovery attempt is intact barring a violation.

Finally, Elastic N.V. ESTC, +1.13% is a large-cap software and search name.

Late last month, the shares knifed to record highs, rising after the company’s quarterly results. The prevailing pullback places the shares 8.2% under the August peak.

Tactically, the post-breakout low (106.85) has closely matched the breakout point (106.98). A sustained posture higher signals a firmly-bullish bias.

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.