The Technical Indicator: Charting a solid August start: S&P 500, Nasdaq stage latest summer breakouts

On a headline basis, the Nasdaq Composite has rallied to record highs — reaching previously uncharted territory — while the S&P 500 has tagged five-month highs, breaking from a jagged July range.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.02% hourly chart highlights the past two weeks.

As illustrated, the S&P has started August with a breakout, reaching five-month highs.

The breakout point (3,280) pivots to support.

Slightly more broadly, the prevailing upturn punctuates a successful late-July test of the range bottom (3,200). Constructive price action amid last week’s jagged backdrop.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.28% remains the weakest major benchmark.

In fact, the index briefly ventured under its 50- and 200-day moving averages across consecutive sessions to conclude July. Shaky price action.

The strong August start places the Dow on firmer technical ground atop former resistance (26,600). This area pivots to first support.

Against this backdrop, the Nasdaq Composite COMP, -0.20% is off to a strong August start.

In the process, the index has reached all-time highs, gapping atop the July peak.

Tactically, the breakout point (10,840) roughly matches the top of the gap (10,831), an area that pivots to support.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has gapped to previously uncharted territory at all-time highs.

The breakout punctuates a jagged July range, and confirms the prevailing uptrend. On further strength, a near- to intermediate-term target projects to the 11,460 area.

Conversely, a notable floor matches the breakout point (10,840) and the top of the gap.

Looking elsewhere, the Dow Jones Industrial Average remains weaker, though it has survived a test of two headline inflection points:

• The 200-day moving average, currently 26,225.
• The 50-day moving average, currently 26,172.

Consider that the 50-day moving average (in blue) has underpinned the Dow’s recovery attempt, effectively defining the May, June and July lows. The prevailing upturn preserves a bullish intermediate-term bias.

On further strength, significant resistance spans from 27,071 to 27,102, levels matching the July and March peaks.

Also recall that a golden cross — or bullish 50-day/200-day moving average crossover — will likely signal mid-week. As always, the crossover is frequently a lagging indicator.

Meanwhile, the S&P 500 has extended its uptrend, reaching five-month highs.

The prevailing upturn punctuates a jagged late-July range. Tactically, the breakout point (3,280) pivots to near-term support.

The bigger picture

Collectively, the major U.S. benchmarks remain in divergence mode — each index is doing different things — though the summer price action has been constructive, on balance.

Each benchmark’s intermediate-term bias remains bullish.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +0.40% has flatlined, asserting a tight range atop the 200-day moving average.

To reiterate, resistance matches the July peaks, an area spanning from 149.35 to 150.20. A retest is underway early Tuesday.

Follow-through atop resistance would confirm the prevailing uptrend, positioning the small-cap benchmark to build on its decisive mid-July breakout.

Similarly, the SPDR S&P MidCap 400 ETF has asserted a tight range atop the 200-day moving average.

Recall that a golden cross — or bullish 50-day/200-day moving average crossover — will likely signal next week. Separately, the 50-day moving average has underpinned the recovery attempt.

Looking elsewhere, the SPDR Trust S&P 500 SPY, -0.02% has extended to five-month highs.

This week’s modest follow-through resolves a recent bull-bear stalemate at resistance matching the June peak.

Placing a finer point on the S&P 500, the index has started August with a break to five-month highs.

Tactically, the breakout point (3,280) pivots to near-term support.

Delving deeper, the S&P has registered consecutive weekly lows closely matching the range bottom (3,200). Constructive price action.

More broadly, the early-August upturn punctuates a “higher high” versus the July peak, extending the prevailing uptrend.

Tactically, more distant overhead matches the top of the February gap (3,328).

On further strength, an intermediate-term target projects from the former range to the 3,360 area.

Beyond technical levels, the S&P 500’s intermediate-term bias remains comfortably bullish. All trends point higher, based on today’s backdrop, pending signs of a bearish pulse.

Also see: Charting a (bullish) holding pattern, S&P 500 digests break to 5-month highs.

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 Transportation Average IYT, +0.24% is acting well technically.

The group initially spiked three weeks ago, rising atop the 200-day moving average on increased volume.

More immediately, the early-August upturn — fueled by a volume spike — places five-month highs within striking distance. Follow-through atop the June peak (179.88) would mark a “higher high” confirming the group’s uptrend.

Tactically, trendline support closely tracks the 50-day moving average, and is rising toward the 200-day moving average, currently 171.25. A breakout attempt is in play barring a violation.

Initially profiled July 15, Costco Wholesale Corp. COST, +2.32% has effectively flatlined, but remains well positioned.

The shares started July with a breakout, knifing atop trendline resistance to all-time highs.

The subsequent tight range is a continuation pattern, positioning the shares to build on the early-July spike. Tactically, the prevailing range bottom (322.00) is closely followed by gap support (319.70). A sustained posture higher signals a firmly-bullish bias.

More broadly, the shares are well positioned on the three-year chart, rising from an extended test of the 50-week moving average.

Note that the company will report its July sales Wednesday.

FireEye, Inc. FEYE, +2.83% is a mid-cap security software vendor coming to life.

Late last month, the shares knifed to five-month highs, rising after the company’s second-quarter results.

The subsequent pullback has been orderly, placing the shares near the top of the gap (14.74) and 8.4% under the July peak.

Delving deeper, the breakout point closely matches the 200-day moving average, currently 13.90. The prevailing rally attempt is intact barring a violation.

Initially profiled April 20, Teradyne, Inc. TER, -1.71% has returned 41.4% and remains well positioned.

As illustrated, the shares have rallied to the range top, rising to challenge 20-year highs, the best levels since July 2000. An intermediate-term target projects to the 96.00 area on follow-through.

Conversely, the 50-day moving average has marked an inflection point, and is rising toward the range bottom (82.70). The prevailing uptrend is intact barring a violation.

Finally, Amkor Technology, Inc. AMKR, -1.74% is a well positioned mid-cap chip equipment name.

Late last month, the shares knifed to 13-year highs, rising after the company’s strong quarterly results.

The ensuing pullback has been fueled by decreased volume, placing the shares 14.8% under the July peak. Tactically, the breakout point (13.00) pivots to well-defined support. A sustained posture higher signals a firmly-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.