By Michael Ashbaugh, MarketWatch
Focus: Small- and mid-caps stage statistically unusual breakout, Semiconductor sector challenges record highs, SMH, MDC, ZS, WSM, BYND
Technically speaking, the major U.S. benchmarks have taken flight to start June, rising amid distinctly bullish bigger-picture price action.
In the process, the Nasdaq Composite has reached all-time highs -- previously uncharted territory -- as it approaches the marquee 10,000 mark.
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 is off to a strong June start.
Consider that Monday's close (3,232) registered nominally atop the 2019 close (3,230) briefly placing the index in positive year-to-date territory. Selling pressure has resurfaced early Tuesday.
Tactically, an inflection point matches last week's close (3,193.9) and is followed by the top of the gap (3,164).
Meanwhile, the Dow Jones Industrial Average has also taken flight, gapping firmly atop the 200-day moving average.
The index is traversing less-charted territory, better illustrated on the daily chart.
Tactically, a downside inflection point matches last week's close (27,110) and the March peak (27,102).
Against this backdrop, the Nasdaq Composite has rallied to all-time highs.
The breakout point (9,838) pivots to notable support, an area is also detailed on the daily chart below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has reached all-time highs, previously uncharted territory. Recall that the prevailing leg higher originates from major support (9,323).
More immediately, the breakout point (9,838) marks a notable floor.
On further strength, the marquee 10,000 mark is increasingly within view. The index has thus far topped about 73 points under the round-number milestone.
Looking elsewhere, the Dow Jones Industrial Average has knifed decisively atop the 200-day moving average, signaling a primary trend shift.
In the process, the Dow has staged a bullish two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands (). (The Dow has also closed atop the bands across three of the prior four sessions.)
As always, consecutive closes atop the volatility bands are statistically unusual, and signal a tension between time horizons.
For the near-term, the Dow is extended following a massive rally outside the "normal" range of its trailing 20-day volatility. A cooling-off period is due.
But more importantly, extreme bullish momentum has fueled the upturn, likely laying the groundwork for longer-term gains.
Meanwhile, the S&P 500 has also taken flight to start June, placing distance atop its 200-day moving average.
And here again, the upturn has marked an unusual two standard deviation breakout, punctuated by consecutive closes atop the 20-day Bollinger bands ().
The bigger picture
As detailed above, the major U.S. benchmarks have started June with a broadly-based, and longer-term bullish, technical breakout.
In the process, the Dow Jones Industrial Average has reclaimed its 200-day moving average, rising amid statistically unusual bullish momentum. The Dow is the last big three U.S. benchmark to signal a primary trend shift.
Meanwhile, the Nasdaq Composite has reached all-time highs. The marquee 10,000 mark is firmly within view.
Moving to the small-caps, the iShares Russell 2000 ETF has knifed atop its 200-day moving average concurrently with the Dow industrials. The tandem small- and large-cap breakout is unusual in the recent market context.
The prevailing follow-through builds on the steep late-May rally encompassing consecutive closes atop its 20-day volatility bands ().
Meanwhile, the SPDR S&P MidCap 400 ETF has also followed through, placing distance atop its 200-day moving average.
Combined, the small- and mid-cap benchmarks -- as well as the Dow industrials -- have concurrently signaled primary trend shifts across just the prior two sessions.
Looking elsewhere, the SPDR Trust S&P 500 has also extended a strong June rally.
Its follow-through atop next resistance (313.84) was initially fueled by a volume spike.
Market breadth revisits bullish extremes
Moving to market breadth, extreme bullish momentum has resurfaced.
Consider that NYSE advancing volume surpassed declining volume by a greater than 8-to-1 margin Friday, and a more impressive 13-to-1 margin in Monday's action.
As always, in a textbook world two 9-to-1 up days, across about a seven-session window, reliably signals a material trend shift. (For instance, the early-2019 rally originated from two 9-to-1 up days across a precisely seven-session window.)
So stepping back slightly, the Russell 2000 and Dow industrials have cleared the 200-day moving average -- amid recent two standard deviation breakouts -- a move dovetailing with firmly-bullish market breadth.
Returning to the four-year view, the S&P 500 has extended a massive bullish reversal.
On further strength, major resistance matches the February gap (3,260) also the top of the long red bar.
Placing a finer point on the S&P 500, the index has taken flight following a primary trend shift initially signaled two weeks ago ().
From current levels, four inflection points stand out:
Against this backdrop, Monday's close (3,232) registered just atop the 2019 close, briefly placing the S&P in positive year-to-date territory. Selling pressure has resurfaced early Tuesday.
So as it applies to the near-term, the downturn's aggressiveness, or lack thereof, is worth tracking. The chances of follow-through improve to the extent the S&P holds relatively tightly to resistance.
Beyond technical levels, the strong June start confirms the primary trend shift signaled to conclude May. The S&P 500's backdrop continues to support a bullish intermediate- to longer-term bias.
Also see: S&P 500 sustains key technical breakout amid bullish market rotation ().
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 VanEck Vectors Semiconductor ETF (SMH) is pressing uncharted territory.
Technically, the group started June with a bull-flag breakout, knifing from a tight late-May range to tag a nominal all-time high.
Underlying the upturn, the group's relative strength index (not illustrated) has tagged its best level since Jan. 2 (the first market day of the year) improving the chances of eventual follow-through.
Tactically, a near-term floor matches the top of the gap (145.75). Delving deeper, trendline support closely matches the breakout point (141.30). A breakout attempt is in play barring a violation.
Moving to specific names, McDonald's Corp. (MCD) is a Dow 30 component coming to life. (Yield = 2.5%.)
As illustrated, the shares have knifed atop trendline resistance, also rising to reclaim the 200-day moving average. The breakout signals a trend shift.
Tactically, the 200-day moving average is followed by the firmer breakout point, circa 190.00. The prevailing rally attempt is intact barring a violation.
Initially profiled April 3, Zscaler, Inc. (ZS) has returned 62.1% and remains well positioned.
Late last month, the shares knifed to record territory, gapping sharply higher after the company's strong quarterly results.
The ensuing pullback has been comparably flat, fueled by decreased volume, placing the shares 9.7% under the June peak. Tactically, a near-term floor matches the post-breakout low (96.60). A sustained posture higher supports a firmly-bullish bias.
As illustrated, the shares have recently gapped to four-year highs, rising amid a volume spike after the company's first-quarter results.
The subsequent flag-like pattern has formed amid decreased volume, positioning the shares to build on the initial spike. Tactically, the rally attempt is intact barring a violation of the breakout point, an area closely matching the top of the gap (76.90).
Initially profiled May 21, Beyond Meat, Inc. (BYND) has returned 15.6% and remains longer-term well positioned.
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June 09, 2020 12:40 ET (16:40 GMT)
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