Charting the market recovery attempt
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CINCINNATI (MarketWatch) -- Though the U.S. markets' recovery attempt remains in play, technical question marks stand out.
The charts below add color:
Before detailing the U.S. markets' wider view, the S&P 500's hourly chart highlights the past two weeks.
As illustrated, the S&P has pulled back to the range following last week's breakout attempt.
From current levels, initial resistance holds at the June peak of 1,363, and is followed by last week's high of 1,375.
Meanwhile, the Dow industrials' near-term backdrop is similar.
In its case, the blue-chip benchmark has pulled in from recent highs, establishing support just above the 50-day moving average.
With Tuesday's upturn, initial resistance holds at the June peak, around 12,900, and is followed by last week's high of 12,961.
And the Nasdaq Composite has also pulled back to the range.
Looking ahead, initial resistance holds at 2,946 (the April low), and is closely followed by the bottom of last week's gap at 2,957.
Also consider that the recent pullback originated just under the 3,000 mark.
Widening the view to six months adds perspective.
On this wider view, significant resistance spans from 2,988 to the 3,000 mark, matching the July peak and the bottom of the May gap.
Conversely, significant support spans from 2,885 to 2,895, matching the top of the June gap. The Nasdaq's 50-day moving average, currently 2,889, rests within this band.
Moving to the Dow, its six-month backdrop is equally jagged.
Nonetheless, the index has drawn buyers at its 50-day moving average.
Consider that the Dow's 50-day currently holds at 12,771, and Monday's low came in just 15 points higher, at 12,886.
And the S&P 500's backdrop rounds out the benchmarks.
As illustrated, notable resistance holds at last week's high of 1,375 matching a three-month downtrend from the April peak.
Conversely, notable support rests at the March low of 1,340, matching the S&P's 50-day moving average, currently 1,337.
The bigger picture
Though the market bias technically points higher, the current backdrop isn't clear-cut.
As detailed in Monday's review, two positives stand out.
To start, the S&P is positioned atop its widely-tracked trending indicators -- the 20-day, 50-day and 200-day moving averages -- signaling an uptrend.
And separately, the S&P has established a series of "higher highs" and "higher lows" also consistent with an uptrend.
So based on the price action itself, the market bias points higher.
Moving to the negatives, even a non-technician might notice that the markets haven't truly trended since May.
Rather, the recent upturn has been punctuated by a series of chaotic whipsaws, driven primarily by coordinated-government actions. The European Union summit agreements and last week's coordinated central bank interest rate cuts stand out as examples.
So while a "pulling-teeth" recovery attempt is in play, it's not firmly grounded from a technical standpoint.
And looking ahead, notable resistance holds at S&P 1,375, matching a three-month downtrend, and last week's high.
All told, the S&P 500's recovery attempt is intact -- though on tenuous footing -- barring a violation of support at the March low (1,340) and the 50-day moving average, currently 1,337.
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.
ETFSymbolMon CloseSupport ResistanceHealth Care Select Sector SPDRXLV$37.83$37.45$38.20Drilling down further, the Health Care Select Sector SPDR (XLV) is acting well technically. (Yield = 2.0%.)
Earlier this month, the group touched a nominal all-time high before pulling in modestly from resistance.
Its shallow pullback suggests sell pressure is limited, positioning the group for a potential breakout.
CompanySymbolMon CloseSupport ResistanceInitially profiled June 27, Costco Wholesale (COST) remains well positioned.
Late last month, the shares gapped to all-time highs, clearing resistance at the May peak.
By comparison, the ensuing pullback has been flat -- driven by lighter volume -- positioning the shares to build on the initial breakout.
The risk/reward can be favorable from current levels with a stop at the late-June low.
CompanySymbolMon CloseSupport ResistancePhillip Morris International, Inc.PM$90.61$88.20$91.05Phillip Morris International, Inc. (PM) is a large-cap name positioned to rise. (Yield = 3.4%.)
As illustrated, the shares are challenging well-defined overhead at the April and May peaks.
The range top marks its all-time high, and the shares face limited resistance on a breakout.
CompanySymbolMon CloseSupport ResistanceOceaneering International, Inc. (OII) is a large-cap provider of engineering services to the offshore oil and natural gas industry.
Technically speaking, the shares have knifed atop a three-month downtrend and the major moving averages.
Both events signal a trend shift, and the risk/reward can be favorable from current levels with a stop around its 50-day moving average, currently just under $47.50.
CompanySymbolMon CloseSupport ResistanceRaytheon Co. (RTN) is a large-cap defense name positioned to rise. (Yield = 3.6%.)
Late last month, the shares spiked to two-year highs, clearing well-defined resistance.
Since then, it has sustained its gains, and its tight one-week range positions the shares to build on the initial breakout.
CompanySymbolMon CloseSupport ResistanceCardtronics, Inc. (CATM) is a mid-cap provider of financial services through automated teller machines (ATMs) and service kiosks.
As illustrated, the shares have staged a directionally steep rally to all-time highs
The subsequent pullback has been comparably shallow -- suggesting that sell pressure is limited -- and its path of least resistance points higher barring a violation of the breakout point.
CompanySymbolMon CloseSupport ResistanceInitially profiled Sep. 19, TJX Companies, Inc. (TJX) has returned 55.6% and remains well positioned.
Technically speaking, the shares have established a steady six-month uptrend that roughly tracks the 50-day moving average.
Its relative strength positions the shares to further outperform, and the risk/reward can be favorable from current levels with a stop at the 50-day.
Editor's Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column, including 100 technical stock picks every month, click here.
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