S&P 500 nails major support amid fragile global market backdrop

Editors Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.

Though U.S. stocks are firmly lower early Tuesday, the market price action is more orderly than the headline numbers suggest.

Consider that the S&P 500 and Nasdaq Composite have effectively nailed major support early Tuesday S&P 2,742 and Nasdaq 7,637. The initial rally from support is constructive, though these potentially consequential retests remain underway.

Before detailing the U.S. markets wider view, the S&P 500s
SPX, -0.44%
hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its pullback from three-month highs.

Its first notable support rests at the May peak (2,742), detailed repeatedly. Tuesdays early session low (2,743) punctuates a successful initial retest.

Meanwhile, the Dow Jones Industrial Average has pulled in more aggressively.

In its case, notable support broadly spans from 24,719 to 24,786, levels matching the 2017 close and 2017 peak.

The Dow has ventured firmly lower early Tuesday, though as always, its the close that matters. On further weakness, gap support (25,542) is followed by the late-May low (25,247).

Against this backdrop, the Nasdaq Composite remains the strongest major benchmark.

As illustrated, the index has pulled in modestly from the range top, digesting last weeks break to record territory.

Tactically, its first notable support matches the March peak (7,637). Tuesdays early session low (7,635) punctuates a successful initial retest.

Combined, the Nasdaq and the S&P 500 have effectively nailed their first significant support early Tuesday.

Widening the view to six months, the Nasdaq is digesting the June break to uncharted territory.

Recall that the post-breakout closing low (7,635), established June 7, closely matched the breakout point (7,637), detailed repeatedly. (See the Friday and Monday reviews.)

Tuesdays early session low (7,635) has also matched support, though the retest remains underway.

On further weakness, a near-term floor (7,595) is followed by the June breakout point, circa 7,474.

Looking elsewhere, the Dow Jones Industrial Average has pulled in from three-month highs.

To reiterate, its first notable floor matches the 2017 peak (24,876). Last weeks low registered just 18 points above support.

On further weakness, the June low (24,542) is followed by the late-May Italy-induced low (24,247).

Beyond technical levels, the Dows prevailing backdrop remains constructive. The index is rising from a double bottom defined by the March and May lows and has established a series of higher highs and higher lows.

Meanwhile, the S&P 500 has nailed next resistance, and pulled in.

Last weeks close (2,779.7) matched the 2,780 mark, and the subsequent downturn preserves the S&Ps range top. To reiterate, its first notable support matches the May peak (2,742).

The bigger picture

Though U.S. stocks are firmly on the defensive early Tuesday, the market price action is more orderly than the headline numbers suggest.

As detailed above, the S&P 500 and Nasdaq Composite have effectively nailed major floors at Tuesdays early low S&P 2,742, and Nasdaq 7,637, respectively. The initial rally from support is constructive, though these potentially consequential retests remain underway.

Moving to the small-caps, the iShares Russell 2000 ETF started the week with its latest record close.

Fundamentally, small-caps operate less globally, and more domestically, insulating the benchmark from cross currents elsewhere.

Tactically, near-term support (165.30) is closely followed by the May peak (164.39).

Meanwhile, the S&P MidCap 400 has pulled in from a less decisive break to record territory.

A retest of the breakout point (362.50) remains underway. Mondays close (362.66) matched support, though the MDY is firmly on the defensive to start Tuesday.

Against this backdrop, the SPDR Trust S&P 500 has pulled in from three-month highs.

Tactically, the 20-day moving average, currently 275.15, marks an inflection point. This is closely followed by the SPYs breakout point (274.25), a level matching the May peak.

Placing a finer point on the S&P 500, its six-month backdrop remains bullish.

Recall that the initial June breakout registered as statistically unusual, encompassing three consecutive closes atop the 20-day volatility bands. (See the June 12 review.)

The subsequent flag pattern held tightly to the 2,780 mark at least initially. Last weeks close (2,779.7) matched resistance.

More immediately, the S&P 500s May peak (2,742) marks its first notable floor. The S&P has bottomed early Tuesday at 2,743 matching support though the retest remains underway.

Delving deeper, the S&Ps former range top (2,710) is closely followed by the ascending 50-day moving average, currently 2,708.

As always, its not just what the markets do, its how they do it, but generally speaking, the S&P 500s intermediate-term bias points higher barring a violation of the 2,710 area.

See also: Charting the S&P 500s bullish spike atop the 20-day volatility bands.

Tuesdays 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.

Charting a vulnerable global market backdrop

Drilling down further, several influential regions are tenuously positioned amid this weeks global market volatility spike. Quickly consider the following:

To start, the iShares China Large-Cap ETF
FXI, -1.48%
has pulled in to major support, pressured after a failed test of trendline resistance.

The FXI has ventured under the range bottom, circa 45.50, early Tuesday.

Put differently, the shares are traversing less-charted territory illustrated on the three-year chart and vulnerable to potentially material downside follow-through.

Tactically, a nearly immediate reversal to the range atop the 45.50 area would mark an early step toward stabilization. Conversely, the February low (44.60) marks a deeper inflection point, and is followed by more distant support fractionally under 42.00.

In a related move, the Shanghai Composite Index plunged as much as 5% intraday, reaching its lowest level, below the 3,000 mark, since 2016. Over 1,000 individual China-listed names plunged at least 10% intraday.

Similarly, the iShares MSCI Japan ETF
EWJ, -1.20%
has reached a major technical test.

Specifically, the shares have pulled in to the 200-day moving average, currently 59.67, from a failed test of trendline resistance.

The shares have violated the 200-day moving average early Tuesday marking the first venture lower since July 2016 and a close lower would inflict technical damage.

As always, the 200-day is a widely-tracked longer-term trending indicator. A posture lower generally signals a primary downtrend.

Against this backdrop, the iShares Europe ETF
IEV, -0.89%
is also technically vulnerable, pressured amid recently heightened political uncertainty.

As illustrated, the shares have plunged from a double top defined by the April and May peaks and subsequently failed a retest of the 50- and 200-day moving averages from underneath.

And here again, the shares have followed through lower early Tuesday, violating major support, circa 45.50.

Tactically, the IEV has reached less-charted territory, illustrated on the three-year chart, opening the path to potentially swift downside follow-through. A reversal atop the breakdown point (45.50) would places the brakes on bearish momentum.

Finally, the iShares MSCI Emerging Markets ETF
EEM, -0.99%
has already broken down technically.

In the process, the shares have reached nine-month lows, resolving a massive bearish descending triangle.

Tactically, a near-term downside target projects to the 43 area. Conversely, an eventual close atop the breakdown point (45.10) would stabilize the backdrop.

Charting a crude oil downtrend amid strengthening U.S. dollar

Looking elsewhere, pronounced cross currents across asset classes detailed previously remain in play. On balance, the volatility elsewhere has registered as inconsequential for U.S. stocks, though Tuesdays potential damage, or lack thereof, is pending.

To start, the United States Oil Funds
USO, -1.28%
intermediate-term downtrend is intact. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

As illustrated, the USO has turned lower, pressured amid volatility ahead of OPECs Friday meeting in Vienna. Major producers Saudi Arabia and Russia are reportedly pushing to increase output.

Tactically, an eventual reversal atop the trendline, and more important gap resistance (13.93), would reassert the USOs former uptrend.

Much more broadly, major support matches the April low (12.47), an area defining a former multi-year range top (12.45), illustrated on the four-year chart. The USOs longer-term bias points higher barring a violation.

Amid the cross currents detailed, the U.S. dollar profiled last week continues to strengthen.

To reiterate, the Invesco U.S. Dollar Bullish ETF
UUP, +0.24%
is challenging nearly 52-week highs, its best level since June 26.

Fundamentally, the dollar spiked last week not due to the Federal Reserves policy language, but after the ECBs unexpectedly dovish-leaning statement. More immediately, trade-related uncertainty has contributed to the prevailing breakout attempt.

An intermediate-term target projects to the 25.40 area on follow-through.

Returning full circle, Chinas yuan has reached five-month lows this week, registering its biggest single-day downturn in about 18 months.

Editors 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.

Company Symbol Date Profiled
Vishay Intertechnology, Inc. VSH June 18
Dillards, Inc. DDS June 18
Tyson Foods, Inc. TSN June 18
Alphabet, Inc. GOOGL June 15
Allergan AGN June 15
TE Connectivity Ltd. TEL June 15
Pepsico, Inc. PEP June 14
Bunge Limited BG June 14
Glu Mobile, Inc. GLUU June 14
Shopify, Inc. SHOP June 13
Commvault Systems, Inc. CVLT June 13
Mosaic Co. MOS June 13
Consumer Staples Select Sector SPDR XLP June 13
iShares Transportation Average ETF IYT June 12
SPDR S&P Regional Banking ETF KRE June 12
Roku, Inc. ROKU June 12
Microchip Technology, Inc. MCHP June 12
Analog Devices, Inc. ADI June 12
Viking Therapeutics, Inc. VKTX June 12
SPDR S&P Homebuilders ETF XHB June 11
Sohu.com Limited SOHU June 11
Medicines Co. MDCO June 11
Capital One Financial Corp. COF June 8
Health Care Select Sector SPDR XLV June 8
Materials Select Sector SPDR XLB June 7
Eaton Corp. ETN June 7
Monster Beverage Corp. MNST June 7
Tesla, Inc. TSLA June 7
Motorola Solutions, Inc. MSI June 6
VMWare, Inc. VMW June 6
Foot Locker, Inc. FL June 6
SPDR S&P Biotech ETF XBI June 5
Twitter, Inc. TWTR June 5
Scientific Games Corp. SGMS June 5
Kohls Corp. KSS June 5
JD.com, Inc. JD June 5
ON Semiconductor Corp. ON May 25
Pan American Silver Corp. PAAS May 25
Agios Pharmaceuticals, Inc. AGIO May 24
Immunomedics, Inc. IMMU May 24
Alibaba Group Holding Limited BABA May 23
Supernus Pharmaceuticals, Inc. SUPN May 23
Electronic Arts, Inc. EA May 22
Momo, Inc. MOMO May 22
Industrial Select Sector SPDR XLI May 21
Union Pacific Corp. UNP May 21
Twilio, Inc. TWLO May 21
Intercept Pharmaceuticals, Inc. ICPT May 21
Energy Select Sector SDPR XLE May 18
Packaging Corp. of America PKG May 17
Range Resources Corp. RRC May 17
SPDR S&P Metals & Mining ETF XME May 17
SPDR S&P Retail ETF XRT May 15
United Parcel Service, Inc. UPS May 14
Lowes Companies, Inc. LOW May 14
Toyota Motor Corp. TM May 14
Fabrinet FN May 14
Pegasystems, Inc. PEGA May 14
Texas Instruments, Inc. TXN May 11
PowerShares QQQ Trust QQQ May 10
Facebook, Inc. FB May 9
Electronics for Imaging, Inc. EFII May 9
Nutanix, Inc. NTNX May 9
SPDR S&P Oil and Gas Exploration & Production ETF XOP May 9
Tableau Software, Inc. DATA May 8
Coupa Software, Inc. COUP May 8
Apple, Inc. AAPL May 7
American Express Co. AXP May 7
PDC Energy, Inc. PDCE May 7
Under Armour, Inc. UA May 2
Norfolk Southern Corp. NSC May 2
Advanced Micro Devices, Inc. AMD May 1
UnitedHealth Group, Inc. UNH Apr. 30
Nike, Inc. NKE Apr. 30
DSW, Inc. DSW Apr. 30
Home Depot, Inc. HD Apr. 27
Noble Energy, Inc. NBL Apr. 27
Sanmina Corp. SANM Apr. 27
Costco Wholesale Corp. COST Apr. 26
CSX Corp. CSX Apr. 26
Applied Optoelectronics, Inc. AAOI Apr. 19
Chipotle Mexican Grill, Inc. CMG Apr. 19
Wingstop, Inc. WING Apr. 19
F5 Networks, Inc. FFIV Apr. 18
FedEx Corp. FDX Apr. 17
Pacira Pharmaceuticals, Inc. PCRX Apr. 17
Valero Energy VLO Apr. 16
EOG Resources, Inc. EOG Apr. 11
Autodesk, Inc. ADSK Apr. 10
NetApp, Inc. NTAP Apr. 9
GlaxoSmithKline GSK Apr. 9
Whiting Petroleum Corp. WLL Mar. 22
Dominos Pizza, Inc. DPZ Mar. 21
Orbotech Ltd. ORBK Mar. 16
Eastman Chemical Co. EMN Mar. 16
Veeva Systems, Inc. VEEV Mar. 15
Autohome, Inc. ATHM Mar. 14
Burlington Stores, Inc. BURL Mar. 14
Baozun, Inc. BZUN Mar. 9
Intel Corp. INTC Mar. 8
AxoGen, Inc. AXGN Mar. 8
Zebra Technologies Corp. ZBRA Mar. 7
TJX Companies, Inc. TJX Mar. 6
Chart Industries, Inc. GTLS Mar. 6
Macys, Inc. M Mar. 5
Five9, Inc. FIVN Mar. 5
LivePerson, Inc. LPSN Feb. 28
VeriSign, Inc. VRSN Feb. 26
Shutterfly, Inc. SFLY Feb. 22
ServiceNow, Inc. NOW Feb. 21
Palo Alto Networks, Inc. PANW Feb. 16
Adobe Systems, Inc. ADBE Feb. 16
Salesforce.com, Inc. CRM Feb. 12
Red Hat, Inc. RHT Feb. 1
Fortinet, Inc. FTNT Jan 19
Insulet Corp. PODD Jan. 17
Arrowhead Pharmaceuticals Corp. ARWR Jan. 11
Vericel Corp. VCEL Jan. 10
Sarepta Therapeutics, Inc. SRPT Jan. 3
MSCI, Inc. MSCI Nov. 20
Motorola Solutions, Inc. MSI Nov. 14
Splunk, Inc. SPLK Nov. 9
Akamai Technologies, Inc. AKAM Oct. 30
Lululemon Athletica, Inc. LULU Oct. 24
HubSpot, Inc. HUBS Oct. 4
XPO Logistics, Inc. XPO Oct. 2
Nvidia Corp. NVDA Sept. 27
Bottomline Technologies, Inc. EPAY July 13
GrubHub, Inc. GRUB May 4
Square, Inc. SQ Mar. 3
Netflix, Inc. NFLX Oct. 4
Microsoft Corp. MSFT Aug. 5

Michael Ashbaugh

Michael Ashbaugh writes technical analysis for MarketWatch and is editor of MarketWatch’s “The Technical Indicator” newsletter.

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