The Technical Indicator: Bull trend strengthens: S&P 500, Nasdaq clear 20-day volatility bands

Against this backdrop, the S&P 500 and Nasdaq Composite have reached less-charted territory, rising within striking distance of record highs.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.36%  hourly chart highlights the past two weeks.

As illustrated, the S&P has taken flight, extending a steep October breakout.

Tactically, the top of the gap (3,499.6) matches the 3,500 mark.

Delving slightly deeper, last week’s high (3,482) marks the bottom of the gap.

Similarly, the Dow Jones Industrial Average DJIA, -0.35%  has extended its breakout.

In the process, the Dow has notched consecutive closes atop the 2019 close (28,538), placing it in positive year-to-date territory.

The 29,000 mark is increasingly within view.

Against this backdrop, the Nasdaq Composite COMP, +0.11% has also knifed to one-month highs.

The prevailing upturn originates from familiar support (11,126), an area detailed previously.

Last week’s low (11,124) closely matched support.

More immediately, the top of the gap (11,704) marks a near-term floor.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its October rally, rising from a successful test of the 50-day moving average (in blue).

Against this backdrop, Monday’s close registered atop the 20-day Bollinger bands to punctuate a bullish two standard deviation breakout.

Tactically, the Nasdaq is near-term extended, and due to consolidate, following a move outside its “expected” trailing 20-day volatility range.

But more importantly, the index has registered statistically unusual bullish momentum, likely laying the groundwork for longer-term incremental gains. As always, consecutive closes atop the volatility bands are more definitively bullish.

On further strength, the Nasdaq’s record close (12,056) is closely followed by its absolute record peak (12,074).

Looking elsewhere, the Dow Jones Industrial Average is also traversing less-charted territory.

Additional resistance matches the September closing peak (29,100) and absolute September peak (29,199), levels defining seven-month highs.

The Dow’s all-time high (29,568.57) — established Feb. 12 — remains more distant.

Meanwhile, the S&P 500 has staged a decisive October spike.

Here again, Monday’s close registered atop the 20-day volatility bands (see link) to punctuate a bullish two standard deviation breakout.

Tactically, the S&P’s record close (3,580.84) and absolute record peak (3,588.11) are increasingly within view.

The bigger picture

Collectively, the bigger-picture backdrop has strengthened amid an unseasonably strong early-October rally.

Against this backdrop, the S&P 500 and Nasdaq Composite have reached a less-charted patch, rising within striking distance of record highs. Both benchmarks have registered a bullish two standard deviation breakout.

Meanwhile, the Dow Jones Industrial Average continues to lag slightly behind, but has rallied within view of seven-month highs.

Moving to the small-caps, the iShares Russell 2000 ETF has extended a break to seven-month highs. Tactically, the breakout point, circa 159.80, pivots to support.

Similarly, the SPDR S&P MidCap 400 ETF has reached seven-month highs.

Here again, the breakout point, circa 360.20, pivots to support.

More broadly, the small- and mid-caps’ resurgence is consistent with market rotation, and broadening participation, strengthening the bull case.

Looking elsewhere, the SPDR Trust S&P 500 has not registered multi-month highs.

Nonetheless, the SPY has extended a rally atop major resistance, rising within striking distance of record territory.

Placing a finer point on the S&P 500, the index has extended a decisive October breakout.

To reiterate, a near-term floor matches the top of the gap, and the 3,500 mark.

Slightly more broadly, the S&P’s first significant support matches the mid-September peak, circa 3,428, an area also illustrated below.

More immediately, the S&P has reached less-charted territory punctuated by not-so-well-defined resistance.

In fact, the absence of resistance has arguably contributed to the swift October follow-through.

Against this backdrop, Monday’s close (3,534) marked the S&P’s second-best close on record. The session close also matched the top of the early-September gap (3,535).

On further strength, the S&P’s record close (3,580.84) and absolute record peak (3,588.11) are increasingly within view.

Beyond technical levels, the S&P 500 is near-term extended, and due to consolidate, following a two standard deviation breakout.

But more importantly, bigger-picture backdrop has strengthened to start October amid broadening participation. (See for instance, the small- and mid-caps’ resurgence.) The S&P 500’s intermediate-term path of least resistance continues to point higher.

Also see: Charting a bullish Q4 start: S&P 500 extends rally from major support.

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 MSCI Emerging Markets ETF is acting well technically. (Yield = 2.0%.)

As illustrated, the shares have cleared the range top, rising to tag a two-year high. A near-term target projects to the 48 area on follow-through.

Conversely, the breakout point (45.40) pivots to well-defined support.

More broadly, the shares are well positioned on the three-year chart, rising from a continuation pattern hinged to the massive early-2020 V-shaped reversal.

Initially profiled March 27, Apple, Inc. AAPL, -1.71%  has returned 92.6% and remains well positioned.

As illustrated, the shares have knifed to one-month highs, rising ahead of Tuesday’s iPhone 12 launch event, Apple’s first phone to support 5G services.

The prevailing upturn originates from trendline support and places record highs within striking distance.

Tactically, the top of the gap (119.28) roughly matches the breakout point, and is followed by the ascending 50-day moving average. A sustained posture higher signals a comfortably bullish bias.

Similarly, Amazon.com, Inc. AMZN, +0.80%  is a mega-cap name coming to life.

Technically, the shares have staged a strong-volume breakout, rising amid Tuesday’s Amazon Prime Day kick-off, a two-day sales event.

The upturn punctuates a tight early-October range — hinged to the 50-day moving average — and places record highs within view.

Tactically, gap support — at 3,339.50 and 3,289.00 — is followed by the deeper breakout point, circa 3,247. The prevailing rally attempt is intact barring a violation.

First Solar, Inc. FSLR, +4.40%  is a well positioned large-cap name.

As illustrated, the shares are challenging nine-year highs, an area matching the 2018 peak (81.72) and August peak (81.87).

The October rally has been fueled by increased volume — and punctuated by persistence near the range top — laying the groundwork for potential follow-through. Tactically, near-term support, circa 76.50, offers an area to work against. A breakout attempt is in play barring a violation.

More broadly, the shares are well positioned on the one-decade chart, challenging major resistance from a prolonged multi-year base.

Initially profiled Aug. 20, Adobe, Inc. ADBE, +0.87%  has added 6.8% and remains well positioned.

As illustrated, the shares have reached one-month highs, clearing resistance matching the mid-September peak. The strong-volume upturn punctuates an extended test of the 50-day moving average.

Tactically, the breakout point (505.50) pivots to well-defined support.

Conversely, Adobe’s record peak (536.88) is followed by an intermediate-term projected target in the 550 area.

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.