The Technical Indicator: Charting a bull-trend whipsaw, S&P 500 absorbs pullback from record highs

Against this backdrop, the S&P 500 has reversed to its former December range, though amid a downturn that has inflicted limited damage in the broad sweep.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.48%  hourly chart highlights the past two weeks.

As illustrated, the S&P has pulled in to its range after briefly tagging record highs.

Tactically, notable resistance matches last week’s gap (3,723). Tuesday’s early session high (3,722.5) has registered nearby.

Conversely, significant support matches the November peak (3,646).

Similarly, the Dow Jones Industrial Average DJIA, +0.47%  has pulled in to its range after briefly tagging record highs.

Still, the index has initially maintained major support (29,964), an area matching the mid-November range top, also detailed on the daily chart.

Meanwhile, the Nasdaq Composite COMP, +0.53% has sold off from its range top.

This was the lone major U.S. benchmark not to conclude 2020 with a record high.

But here again, the index has maintained notable support (12,607), an area matching its breakout point, also detailed below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq is digesting the late-2020 rally to record highs.

Though the index formed a bearish engulfing pattern to start January — the long red bar, engulfing the prior session’s range — the downturn has been underpinned by the breakout point (12,607). Limited damage has been inflicted.

Delving deeper, the November peak (12,244) is followed by the 50-day moving average, currently 12,128, and the late-November breakout point (12,074). A sustained posture atop this area signals a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average also registered a bearish reversal to start the new year. The index has pulled in to its former December range.

Against this backdrop, the index has maintained support matching the mid-November range top (29,964).

Delving deeper, the Dow’s former record high (29,568) — established last February — is followed by the 50-day moving average, currently 29,388.

Likely last-ditch support (29,127) closely matches the November gap. The Dow’s bullish intermediate-term bias is intact barring a violation.

Meanwhile, the S&P 500 has started 2021 with a bearish engulfing pattern.

In its case, Monday’s downturn (long red bar) encompassed the range of the prior session, as well as the prior week’s range.

Still, the downturn has been underpinned by the 20-day moving average, currently 3,700, a widely-tracked near-term trending indicator. The S&P has not closed under the 20-day since Nov. 2.

The bigger picture

As detailed above, the major U.S. benchmarks are off to a less-than-stellar 2021 start.

Each index registered a bearish reversal to start the new year, selling off respectably from recent all-time highs.

But on the positive side, each index has initially maintained notable support. The single-day downdraft has lacked material follow-through early Tuesday, thus far inflicting limited damage in the broad sweep.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +1.76%  is digesting its late-2020 rally to record territory.

The small-cap benchmark has initially maintained first support (191.50) detailed previously. On further weakness, a deeper floor, circa 185.40, closely matches the November peak.

Similarly, the SPDR S&P MidCap 400 ETF MDY, +1.62%  is digesting a December rally to record highs.

Here again, the MDY has maintained first support (410.70) even amid a strong-volume first-day-of-the-year downturn.

Looking elsewhere, the SPDR Trust S&P 500 SPY, +0.47%  has pulled in to its former December range.

Tactically, the former breakout point — the 370.80-to-371.07 area — pivots to resistance. Conversely, the SPY has maintained a deeper floor matching the mid-November range top (364.40).

Beyond specific levels, Monday’s internals registered as conspicuously tame despite the strong-volume downturn. Consider that declining volume surpassed advancing volume by about a 2-to-1 margin on both the NYSE and Nasdaq.

Placing a finer point on the S&P 500, the index has also pulled in to its former December range.

To reiterate, notable resistance matches last week’s gap (3,723) a level also defining the weekly low.

Tuesday’s early session high (3,722.5) has effectively matched resistance.

More broadly, significant support spans from 3,633 to 3,646, the latter matching the November peak.

On further weakness, the 3,588-to-3,594 area — detailed previously — closely matches the ascending 50-day moving average, currently 3,596.

Delving deeper, the October peak (3,550) continues to mark last-ditch support, an area partly defining the S&P’s late-2020 double bottom.

All told, a garden-variety pullback — or healthy consolidation phase — seems to be underway to start the new year. Still, the downturn has initially lacked material follow-through, inflicting limited real damage.

Broadly speaking, the S&P 500’s intermediate-term bullish bias is intact barring violation of the areas detailed above. The 3,550 area marks likely last-ditch support.

Also see: Charting a bullish backdrop as the S&P 500’s wild 2020 ride concludes.

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 Gold Shares ETF GLD, +0.32%  has come to life technically.

As illustrated, the shares have gapped atop trendline resistance, rising amid increased volume to start 2021. The breakout signals a trend shift.

Underlying the upturn, the GLD’s relative strength index (not illustrated) has registered its best levels since early August, improving the chances of longer-term follow-through.

Tactically, the trendline pivots to support, an area closely matching the bottom of the gap (178.40). The prevailing rally attempt is intact barring a violation.

More broadly, the shares are well positioned on the 10-year chart, rising from a continuation pattern hinged to the sharp mid-2020 break to record territory.

Moving to U.S. sectors, the VanEck Vectors Semiconductor ETF SMH, +1.11%  is acting well technically.

As illustrated, the group has rallied to the range top, briefly tagging record highs amid increased volume. An intermediate-term target projects to the 232 area.

Conversely, a well-defined floor matches the December range bottom, circa 210.40. The prevailing uptrend is firmly-intact barring a violation.

Initially profiled Dec. 1, Cirrus Logic, Inc. CRUS, +1.88%  has edged slightly higher and remains well positioned.

Technically, the shares have reached 11-month highs, rising to start the new year despite a down market.

The upturn punctuates an orderly December range — a continuation pattern — hinged to a massive double bottom defined by the June and September lows. (See the one-year chart.) A near- to intermediate-term target projects to the 88 area.

Conversely, the breakout point (83.10) pivots to support. A sustained posture higher signals comfortably bullish bias.

FireEye, Inc. FEYE, -1.01%  is a well positioned large-cap cybersecurity name.

The shares initially spiked two weeks ago, rising amid a sustained volume spike after the December cyber-hack.

The subsequent flag-like pattern has formed amid decreased volume, placing the shares 16.8% under the December peak.

Tactically, the post-breakout low (20.76) closely matches gap support (20.80). The prevailing rally attempt is firmly-intact barring a violation.

More broadly, the shares are well positioned on the five-year chart, sustaining a break atop major resistance matching the 2018 peak (20.61).

Finally, Wheaton Precious Metals Corp. WPM, -0.03%  is a large-cap Canada-based gold and silver miner.

As illustrated, the shares have reclaimed the breakdown point (44.00) as well as the 50- and 200-day moving averages to start the year. The strong-volume upturn places trendline resistance under siege.

Tactically, the 50-day moving average, currently 43.15, has marked a recent inflection point. A breakout attempt is in play barring a violation.

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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.