UPDATE: Market bears resurface: S&P 500 nails major resistance amid flattening yield curve
By Michael Ashbaugh, MarketWatch
Focus: 10-year yield ventures under 200-day average, Charting U.S. sub-sector progress, Dow 30 components Apple and Intel diverge
Technically speaking, the major U.S. benchmarks are off to a volatile December start, whipsawing amid persistent trade-policy cross currents and as the yield curve flattens.
Against this backdrop, the S&P 500 has knifed toward major resistance -- tagging the 2,800 mark -- an area that has once again drawn respectable selling pressure.
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 extended its rally attempt, gapping atop the 50- and 200-day moving averages.
In the process, the index started December with a bang, rising to nail the 2,800 mark, closely matching major resistance (2,802). Additional overhead closely matches the mini-crash range top (2,817).
Similarly, the Dow Jones Industrial Average has knifed to three-week highs, reaching less-charted territory, better illustrated on the daily chart.
Tactically, the 50-day moving average, currently 25,533, is followed by an inflection point matching the June peak (25,402).
Meanwhile, the Nasdaq Composite has reached its next major technical test.
Specifically, the index is retesting its 50-day moving average, currently 7,440. This area roughly matches significant resistance (7,474) better illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended a steep rally from the November low. Four overhead inflection points stand out:
Monday's close (7,441) closely matched the 50-day moving average, and the index has pulled in early Tuesday. Tactically, the Nasdaq's near-term rally attempt is intact, though its intermediate-term bias remains bearish pending a close atop the areas detailed.
Looking elsewhere, the Dow Jones Industrial Average is traversing a jagged late-year range.
Recall that the prevailing upturn punctuates a bullish island reversal defined by the November gaps.
Tactically, near-term support matches the 50-day moving average, currently 25,533, and the bottom of the gap (25,549). This is followed by an inflection point at the June peak (25,402).
Meanwhile, the S&P 500 has knifed to major resistance matching the mid-year range top (2,802).
Consider that Monday's gap higher placed it atop the 200-day moving average (2,762) and the 50-day moving average (2,769).
The bigger picture
Collectively, the major U.S. benchmarks have extended a steep rally attempt from the November low.
The prevailing upturn is effectively defined by consecutive gaps higher. Last week's Fed-fueled spike -- the S&P 500's rally to the 2,742 resistance -- has been punctuated by the Dec. 3 "trade-progress" gap higher.
Put differently, both monetary and trade policy have contributed to the reversal, though the rally attempt may have run its course with Tuesday's mid-session downdraft.
Moving to the small-caps, the iShares Russell 2000 ETF has rallied less impressively from the November low.
Still, the small-cap benchmark has risen within view of the 50-day moving average, currently 154.95. The October downdraft originated from the 50-day, and the pending retest may add color.
Meanwhile, the SPDR S&P MidCap 400 remains relatively stronger, rising atop the 50-day moving average, currently 343.70.
Still, major resistance matches the November peak, an area technically spanning from 347.85 to 348.30.
Looking elsewhere, the SPDR Trust S&P 500 (SPY) has knifed to its range top.
To reiterate, significant resistance matches the post-breakdown peak, an area technically spanning from 281.01 to 281.22.
An eventual close atop this area would punctuate a double bottom -- the "W" formation, defined by the October and November lows -- strengthening the bull case.
Against this backdrop, the S&P 500 has extended its rally attempt amid technical price action.
On a headline basis, the S&P 500 has gapped atop the 200-day moving average (2,762) and the 50-day moving average (2,769). The question now is sustainability and follow-through.
Tactically, the S&P 500's near-term recovery attempt remains in play. Support matches the 200-day moving average, as well as the May peak (2,742), and the rally attempt is intact barring a violation.
But ideally, the recovery attempt would be less dependent on the recent single-day gotcha spikes -- rallies fueled by one-off monetary and trade-policy events -- and instead, would more closely resemble an orderly fundamentally-grounded uptrend.
The S&P 500's longer-term technical bias remains bearish pending upside follow-through. An eventual close above the range top (2,817) -- preferably not fueled by an engineered catalyst -- would likely raise the flag to a bullish longer-term shift.
See also: S&P 500 nails the breakdown point (2,673), pulling-teeth retest underway ().
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. ()
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Drilling down further, the 10-year Treasury note yield -- profiled last week () -- has extended its late-year downturn following the Federal Reserve's recent dovish-leaning policy shift.
In the process, the yield is challenging its 200-day moving average, currently 2.96, a trending indicator that generally defines the primary trend. The yield has not closed under its 200-day moving average since November 2017.
To reiterate, the prevailing downturn punctuates a double top -- defined by the October and November peaks -- a pattern that projects to about 2.92. This area closely matches the mid-point of the mid-year range (2.91).
Beyond technical levels, the yield curve has flattened, even inverting fractionally on the short end, an event frequently preceding a recession. Views differ as to the yield curve's relevance amid the recent period of extensive central bank policy tinkering.
Charting U.S. sub-sector cross currents
Looking elsewhere, the U.S. sub-sector backdrop has strengthened slightly, amid apparent U.S.-China trade progress, though it remains bearish-leaning. Three groups exemplify the prevailing backdrop:
To start, the Financial Select Sector SPDR has shown signs of life, clearing the 50-day moving average amid lukewarm volume.
Still, the group remains capped by its breakdown point, an area closely matching the 200-day moving average, currently 27.65.
The group's longer-term bias remains bearish based on today's backdrop, though an eventual close atop resistance would strengthen the bull case.
Meanwhile, the iShares Transportation Average ETF has staged a slightly stronger rally from the November low.
In the process, the group has reclaimed its 50- and 200-day moving averages, as well as a nearly two-month range top, circa 195.
Still, the group closed Monday near session lows, and has followed through firmly lower early Tuesday, returning to the November range.
Tactically, a close near Tuesday's early levels (the 191 area) would punctuate a false breakout, preserving a bearish-leaning bias. The next several sessions may add color.
Looking elsewhere, the Health Care Select Sector SPDR exemplifies a persistent pocket of U.S. sector strength.
To start, the group maintained its 200-day moving average at the October low, outpacing most sectors, as well as the major benchmarks.
More immediately, the group has knifed from a head-and-shoulders bottom, rising to challenge record territory. Tactically, the pattern's neckline pivots to support, circa 93.60, and a breakout attempt is in play barring a violation.
Collectively, a market rally attempt paced by the health care sector -- and lacking true transports and financials participation -- is less-than-ideal technically. These three groups exemplify the prevailing U.S. sub-sector headwind.
Dow 30 components Apple and Intel diverge technically
To start, Apple, Inc. (AAPL) has reversed from seven-month lows.
Still, the shares have initially balked at resistance matching the top of the November gap (184.99). Monday's session high (184.94) registered within five cents.
On further strength, more significant overhead broadly spans from about 192.20 to 194.60, the latter matching the 200-day moving average. Though Apple's recovery attempt is intact, its longer-term technical bias remains bearish pending a close atop this area.
Conversely, fellow Dow 30 component Intel Corp. (INTC) is showing signs of life technically. (Yield = 2.4%.)
As illustrated, the shares have closed fractionally atop the 200-day moving average (49.90) rising to challenge a four-month range top.
The strong December start punctuates a tight November range underpinned by the 50-day moving average. Tactically, the former range top (48.80) pivots to support, and a breakout attempt is in play barring a violation.
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. ()
(MORE TO FOLLOW) Dow Jones Newswires
December 04, 2018 13:34 ET (18:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
MW UPDATE: Market bears resurface: S&P 500 nails -2-
-Michael Ashbaugh; 415-439-6400; AskNewswires@dowjones.com
Company Symbol Date Profiled
VMware, Inc. VMW Dec. 3
Omnicell, Inc. OMCL Dec. 3
United Parcel Service, Inc. UPS Dec. 3
Union Pacific Corp. UNP Dec. 3
Canada Goose Holdings, Inc. GOOS Dec. 3
American Express Co. AXP Nov. 30
Veeva Systems, Inc. VEEV Nov. 30
Mosaic Co. MOS Nov. 30
Lam Research Corp. LRCX Nov. 30
Alibaba Group Holding Ltd. BABA Nov. 28
Sunrun, Inc. RUN Nov. 28
PepsiCo, Inc. PEP Nov. 28
CDW Corp. CDW Nov. 26
Inphi Corp. IPHI Nov. 26
Berry Global Group, Inc. BERY Nov. 26
Ventas, Inc. VTR Nov. 26
Universal Health Services, Inc. UHS Nov. 19
Verisk Analytics, Inc. VRSK Nov. 19
Cypress Semiconductor Corp. CY Nov. 19
Ubiquiti Networks, Inc. UBNT Nov. 13
TripAdvisor, Inc. TRIP Nov. 13
Wright Medical Group, Inc. WMGI Nov. 13
Welltower, Inc. WELL Nov. 12
Xilinx, Inc. XLNX Nov. 12
Fabrinet FN Nov. 12
Acacia Communications, Inc. ACIA Nov. 7
Starbucks Corp. SBUX Nov. 5
American Tower Corp. AMT Nov. 5
Live Nation Entertainment, Inc. LYV Nov. 5
Mellanox Technologies, Ltd. MLNX Nov. 1
Genomic Health, Inc. GHDX Nov. 1
Ulta Beauty, Inc. ULTA Nov. 1
Coca-Cola Co. KO Oct. 31
Utilities Select Sector SPDR XLU Oct. 25
McDonald's Corp. MCD Oct. 24
Church & Dwight Co. CHD Oct. 22
Spirit Airlines, Inc. SAVE Oct. 19
Euronet Worldwide, Inc. EEFT Oct. 18
Yum! Brands, Inc. YUM Oct. 18
Eli Lilly & Co. LLY Oct. 17
CME Group, Inc. CME Oct. 8
Dunkin' Brands Group, Inc. DNKN Sept. 26
FireEye, Inc. FEYE Sept. 25
Glaukos Corp. GKOS Sept. 19
Verizon Communications, Inc. VZ Sept. 13
Cisco Systems, Inc. CSCO Aug. 22
T-Mobile US, Inc. TMUS Aug. 14
Clorox Co. CLX Aug. 10
Pfizer, Inc. PFE July 25
Johnson & Johnson JNJ July 5
Merck & Co., Inc. MRK June 21
Viking Therapeutics, Inc. VKTX June 12
Twilio, Inc. TWLO May 21
UnitedHealth Group, Inc. UNH Apr. 30
Motorola Solutions, Inc. MSI Nov. 14
Microsoft Corp. MSFT Aug. 5
(END) Dow Jones Newswires
December 04, 2018 13:34 ET (18:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.