Charting a corrective bounce, U.S. benchmarks spike amid bearish second-quarter start


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.

Technically speaking, the major U.S. benchmarks have extended a steep corrective bounce from the April low amid a volatile second-quarter start.

In the process, the S&P 500 and Nasdaq Composite have approached notable resistance S&P 2,673, and Nasdaq 7,085, respectively against a bearish intermediate-term market backdrop.



Before detailing the U.S. markets wider view, the S&P 500s
SPX, +1.67%
hourly chart highlights the past two weeks.

As illustrated, the S&P is traversing a wide near-term range, spanning about 120 points or 4.7%.


The range is capped by major resistance matching the 2017 close (2,673). Consecutive weekly highs have registered within one point.

More broadly, the S&P has staged a shaky, but thus far successful, test of the 200-day moving average, currently 2,595.7.


Similarly, the Dow Jones Industrial Average is traversing a wide near-term range, in its case exceeding 1,200 points.

Recall notable overhead broadly spans from 24,526 to 24,719, levels matching the bottom of the March gap and the 2017 close.

Conversely, the 200-day moving average, currently 23,506, closely matches support.


Meanwhile, the Nasdaq Composite continues to whipsaw amid technical price action.

In its case, notable resistance matches the early-March low (7,085) an area also illustrated on the daily chart below.

Tuesdays early session high (7,085.4) has matched resistance.


Widening the view to six months adds perspective.

On this wider view, the Nasdaqs intermediate-term bias remains bearish.

The March island reversal has been punctuated by a failed retest of the trendline, and more recently, the breakdown point matching the early-March low.

An eventual close atop resistance (7,085) and the more distant 50-day moving average, currently 7,215, would mark technical progress.


Looking elsewhere, the Dow Jones Industrial Average is digesting the March breakdown.

Recall that notable support currently matches the 200-day moving average, also illustrated on the hourly chart. The Dow has not closed under the 200-day since June 2016, and has not registered consecutive closes under the 200-day since March 2016.

Conversely, the prevailing range is capped by resistance matching the 2017 close (24,719). This is followed by trendline resistance closely tracking the descending 50-day moving average, currently 24,766.

More broadly, a technically aggressive intermediate-term downturn is clashing with the 200-day moving average, a longer-term trending indicator.



Meanwhile, the S&P 500s price action remains technical despite recent volatility.

The index has notched consecutive weekly highs within one point of the 2,673 resistance.

Conversely, the 200-day moving average has underpinned the range with the exception of a lone close lower to start April, the S&Ps first since June 2016.

The bigger picture

Tuesdays strong start notwithstanding, the bigger-picture backdrop continues to support a bearish intermediate-term bias.

The February and March downdrafts inflicted genuine technical damage, while the more recent rally attempts, though at times spectacular, have failed to follow-through materially.



Moving to the small-caps, the iShares Russell 2000 ETF is compressing between the 50- and 200-day moving averages.

In fact, the 50-day moving average (153.10) is once again under siege early Tuesday. On further strength, resistance matches the 2017 peak (155.41).


Similarly, the S&P MidCap 400s prevailing range is defined by the major moving averages.

Put differently, the MDY has survived an extended test of the 200-day moving average, though its drawn selling pressure near the 50-day moving average, currently 343.90.


Against this backdrop, the SPDR Trust S&P 500
SPY, +1.59%
remains capped by well-defined overhead.

As detailed repeatedly, the specific area matches the 2017 close (266.86) and the post-breakdown peak (266.77).


Last weeks high (266.64) closely matched resistance. An eventual close higher would strengthen the backdrop.

Summing up the backdrop

Collectively, a technically aggressive intermediate-term market downturn continues to clash with the primary trend.


Recall that the S&P 500s powerful early-February downturn was followed by a lackluster rally attempt, and the late-March plunge to the 200-day moving average. The latter resolved a double top defined by the February and March peaks.

More immediately, the prevailing volatility spike has been punctuated by three 9-to-1 down days across a narrow 11-session window. (A down day means that declining volume surpassed advancing volume by the indicated margin.)

To reiterate, in a textbook world, two 9-to-1 down days, across about a seven-session window, would reliably raise the flag to a material trend shift


Tactically, well-documented S&P 500 resistance spans from 2,673 to 2,695, levels matching the 2017 close and 2017 peak. (See the March 27 review.)

Consecutive weekly highs have matched the 2,673 resistance, as did the March 22 peak (2,695.7), a level capping the S&Ps violation of trendline support amid 9-to-1 negative breadth.

An eventual close atop this area would mark technical progress.

Pending such a move, the S&P 500s prevailing backdrop supports a bearish intermediate-term bias. Recent rally attempt have lacked quality as measured by volume, breadth, price action and participation.


See also: Cracks surface in the primary trend, S&P 500 teeters on 200-day average.

See also: Charting a bearish technical tilt, S&P 500 bounces from 200-day average.

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.


Drilling down further, the iShares China Large-Cap ETF
FXI, +3.16%
has survived an extended test of major support.

Recall that the range bottom, circa 46.00, closely matches the 200-day moving average, currently 45.85. The FXI has not closed under the 200-day since January 2017.


Still, the shares remain vulnerable to downside follow-through. Recent downturns have been fueled by tandem sustained volume spikes, and punctuated by comparably flat rally attempts.

As detailed last week, gap resistance rests fractionally under 48.00, and is closely followed by the 50-day moving average, currently 48.35. An eventual close higher would place the brakes on bearish momentum.


Meanwhile, the iShares MSCI Japan ETFs
EWJ, +0.55%
backdrop is incrementally stronger, though its backdrop remains bearish-leaning.

As illustrated, the shares have rallied modestly from support matching the 200-day moving average, rising atop trendline resistance.


Still, additional overhead matches the 50-day moving average, currently 60.56, and the range top, circa 61.00. Follow-through higher would strengthen the bull case.

More broadly, consider that the 50- and 200-day moving averages are compressing, and effectively define the prevailing technical tension.


Looking elsewhere, the iShares Europe ETF
IEV, +1.23%
has recently flirted with the 200-day moving average while still maintaining major support.

Here again, the April upturn places the shares atop trendline resistance. The 50-day moving average, currently 47.20, is under siege.


Combined, China and Japan have thus far maintained the 200-day moving average, while Europe has recently whipsawed at the 200-day without yet breaking down. Still, marquee technical tests remain within striking distance across the global markets.


Moving to specific names, Autodesk, Inc.
ADSK, +3.26%
is a well positioned large-cap software vendor.

The shares initially spiked four weeks ago, gapping sharply higher after the companys fourth-quarter results. The rally resolved a massive bullish island reversal defined by the November and March gaps.


The ensuing pullback has nearly filled the gap (thus far fractionally missing), placing the shares near the breakout point, and 10.7% under the March peak.

Tactically, the 50-day moving average closely matches the breakout point, currently 122.10, and a posture higher supports a bullish bias.


Intrexon Corp.
XON, +4.37%
is a mid-cap biotech name coming to life.

As illustrated, the shares have edged atop the 200-day moving average, tagging a fractional five-month high.

The prevailing upturn comes from a flag-like pattern underpinned by major support positioning the shares to build on the early-March spike.


Tactically, the 200-day closely matches support, circa 17.10, and a breakout attempt is in play barring a violation.


Finally, Zillow Group, Inc.
Z, +3.50%
is a well positioned large-cap name.

The shares initially spiked five weeks ago, staging a nearly straightline spike to record territory amid a down market.


By comparison, the ensuing pullback has been flat, placing the shares near support matching the June peak (51.23). The shares have thus far bottomed within a penny.

A slightly deeper floor matches the March breakout point (48.50), and a posture higher supports a bullish bias.

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
NetApp, Inc. NTAP Apr. 9
GlaxoSmithKline GSK Apr. 9
AMC Entertainment Holdings, Inc. AMC Apr. 9
Lands End, Inc. LE Apr. 5
American Eagle Outfitters, Inc. AEO Apr. 5
Guess, Inc. GES Apr. 2
Continental Resources, Inc. CLR Apr. 2
Whiting Petroleum Corp. WLL Mar. 22
Old Dominion Freight Line, Inc. ODFL Mar. 21
Dominos Pizza, Inc. DPZ Mar. 21
Orbotech Ltd. ORBK Mar. 16
Eastman Chemical Co. EMN Mar. 16
Veeva Systems, Inc. VEEV Mar. 15
Dillards, Inc. DDS Mar. 15
Autohome, Inc. ATHM Mar. 14
Burlington Stores, Inc. BURL Mar. 14
Baozun, Inc. BZUN Mar. 9
Marathon Petroleum Corp. MPC 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
Micron Technology, Inc. MU Mar. 5
Macys, Inc. M Mar. 5
Five9, Inc. FIVN Mar. 5
LivePerson, Inc. LPSN Feb. 28
Fabrinet FN Feb. 28
Apple, Inc. AAPL Feb. 26
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
Varian Medical Systems, Inc. VAR Feb. 15
Salesforce.com, Inc. CRM Feb. 12
ASML Holding N.V. ASML Feb. 12
Red Hat, Inc. RHT Feb. 1
iShares Latin American 40 ETF ILF Jan. 30
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
SPDR Gold Trust GLD Jan. 2
Seagate Technology STX Dec. 13
Best Buy Co. BBY Dec. 11
Kohls Corp. KSS Dec. 6
Abercrombie & Fitch Co. ANF Nov. 20
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
Southern Copper Corp. SCCO Aug. 17
Bottomline Technologies, Inc. EPAY July 13
Weibo Corp. WB May 12
GrubHub, Inc. GRUB May 4
Square, Inc. SQ Mar. 3
Paycom Software, Inc. PAYC Feb. 24
Netflix, Inc. NFLX Oct. 4
Microsoft Corp. MSFT Aug. 5
VanEck Vectors Semiconductor ETF SMH June 23

Related Topics Investing U.S. Stocks Mutual Funds Exchange Traded Funds Options Center Bonds

Quote References SPX +43.71 +1.67% SPY +4.15 +1.59% FXI +1.47 +3.16% EWJ +0.33 +0.55% IEV +0.58 +1.23% ADSK +4.16 +3.26% XON +0.76 +4.37% Z +1.81 +3.50% Show all references
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Michael Ashbaugh writes technical analysis for MarketWatch and is editor of MarketWatch’s “The Technical Indicator” newsletter.

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