The Technical Indicator: Charting a bullish Q4 start: S&P 500 extends rally from major support

Against this backdrop, the S&P 500 has asserted a bullish-leaning intermediate-term bias, rising to three-week highs from a successful test of major support (3,328).

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.11%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its rally attempt, reaching three-week highs.

The prevailing upturn punctuates last week’s range, underpinned by major support (3,328).

From current levels, the breakout point (3,393) marks a near-term floor, a level matching the February peak.

Similarly, the Dow Jones Industrial Average DJIA, +0.32%  has cleared its range top.

Here again, the breakout punctuates a successful test of major support (27,447) a level that underpinned last week’s price action on a closing basis.

More immediately, the 28,000 mark remains an inflection point.

Meanwhile, the Nasdaq Composite COMP, -0.15% is challenging its range top.

The prevailing upturn punctuates a jagged, but successful, test of the 50-day moving average, an area better illustrated on the daily chart below.

Tactically, a notable floor matches the mid-September range top (11,245).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its rally attempt, notching a “higher high” versus the mid-September peak (11,245).

The prevailing upturn punctuates a successful test of the 50-day moving average, currently 11,113, a recent bull-bear inflection point.

Tactically, the sustained break atop the 50-day moving average — combined with a “higher high” to start October — signals a bullish-leaning intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has extended a rally atop key resistance.

The specific area matches the breakdown point (27,580) and the 50-day moving average, currently 27,684.

The Dow’s sustained rally atop resistance signals a bullish-leaning intermediate-term bias. Recall that the 50-day moving average defined the May, June and late-July lows.

Meanwhile, the S&P 500 has also extended its rally attempt, edging atop next resistance (3,393).

In the process, the S&P has reclaimed its 50-day moving average, currently 3,369.

Slightly more broadly, the upturn punctuates a successful test of major support (3,328), a bull-bear inflection point detailed repeatedly.

The bigger picture

Collectively, the major U.S. benchmarks are acting well technically to start October, and the fourth quarter.

On a headline basis, the S&P 500 and Dow industrials have extended their rally attempts, rising from successful tests of major support — S&P 3,328 and Dow 27,447. (See the hourly charts.)

Moving to the small-caps, the iShares Russell 2000 ETF has extended a rally from the September low.

In the process, the small-cap benchmark has reclaimed its 50-day moving average and the breakdown point (153.39).

The breakout neutralizes the September downdraft. Tactically, additional overhead matches the August peak (159.82).

Meanwhile, the SPDR S&P MidCap 400 ETF has also reclaimed its 50-day moving average.

The prevailing follow-through punctuates an October upturn initially fueled by increased volume.

Looking elsewhere, the SPDR Trust S&P 500 SPY, +0.14%  has also rallied atop major resistance.

The specific area matches its former breakout point (338.35) and the 50-day moving average, currently 336.35.

Recall that the prevailing upturn originates from major support matching the June peak.

Placing a finer point on the S&P 500, its near-term backdrop is increasingly straightforward.

To start, the S&P has rallied from major support (3,328), a bull-bear inflection point detailed repeatedly. This area effectively underpinned last week’s range.

Within the range, the 50-day moving average, currently 3,369, remains an inflection point.

Slightly more broadly, the S&P has edged atop the February peak (3,393), a level defining its former breakout point. This area pivots to near-term support.

On further strength, follow-through above the mid-September range top, circa 3,425, would mark a “higher high” incrementally strengthening the bull case.

Conversely, the S&P 500’s 50-day moving average — and major support (3,328) — remain useful bull-bear inflection points. A sustained posture higher signals a bullish-leaning intermediate-term bias.

Also see: Charting a corrective bounce: S&P 500 hesitates at 50-day average.

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, +1.44%  has knifed to its best levels since June, rising amid a risk-on trade. (Treasury yields and bond prices are inversely correlated. Lower bond prices signal increased investor risk appetite.)

The October upturn punctuates a tight seven-week range, underpinned by the 50-day moving average.

Tactically, the upturn places the yield’s range top (0.79) — a level closely matching the April peak — firmly under siege. Tuesday’s early session high (0.792) has matched resistance.

As detailed repeatedly, follow-through above the range top would open the path to a less-charted patch amid a developing double bottom. Such a move could be punctuated by swift upside follow-through. (See the mid-June spike.)

Conversely, a downside inflection point matches the yield’s former range top (0.75). The prevailing breakout attempt is intact barring a violation. (Also see the Aug. 28 review and Sept. 23 review.)

Moving to U.S. sectors, the iShares Transportation Average IYT, +0.90%  is acting well technically.

The group initially spiked two months ago, staging a steep early-August breakout. The upturn marked a two standard deviation breakout, encompassing four straight closes atop the 20-day Bollinger bands.

More immediately, the group has asserted an orderly six-week range — a bullish continuation pattern — positioning it to build on the steep August rally.

Tactically, trendline support closely tracks the 50-day moving average, and is followed by the former breakout point (190.00). A posture higher signals a bullish intermediate-term bias.

Moving to specific names, Motorola Solutions, Inc. MSI, +0.37%  is a well positioned large-cap name.

Technically, the shares are challenging seven-month highs, rising from a double bottom defined by the May and July lows.

The prevailing tight one-week range signals muted selling pressure near resistance, improving the chances of eventual follow-through. Tactically, a breakout attempt is in play barring a violation of the October low (153.70).

Also notice the pending golden cross — or bullish 50-day/200-day moving average crossover — signaling that the intermediate-term uptrend has overtaken the longer-term trend.

Gap, Inc. GPS, +0.67%  is a large-cap retailer coming to life.

As illustrated, the shares have knifed to 52-week highs, clearing resistance matching the September peak. The upturn originates from trendline support closely tracking the 50-day moving average.

Though near-term extended, and due to consolidate, a pullback toward the breakout point (18.40) would offer an attractive entry.

More broadly, the shares are well positioned on the three-year chart, edging atop major resistance matching the late-2019 range top.

Finally, Sunnova Energy International, Inc. NOVA, +1.32%  — public since July 2019 — is a mid-cap developer of residential-solar and energy-storage solutions.

Late last month, the shares knifed to record highs, clearing the August peak amid a volume spike.

The subsequent pullback has been underpinned by the breakout point (28.60), placing the shares 14.9% under the October peak.

Tactically, deeper support matches the August and September gaps, circa 27.20. A sustained posture higher signals a 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.