By Michael Ashbaugh, MarketWatch
Focus: Rising interest rates and energy prices signal reflation trade, 10-year yield and crude oil take flight, TNX, USO, AMD, SEDG, CSCO
Technically speaking, the major U.S. benchmarks have asserted a near-term holding pattern, pulling in modestly from all-time highs.
Still, the slight downturn punctuates previously aggressive January breakouts amid a still comfortably bullish bigger-picture backdrop.
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 digesting its latest break to all-time highs. The flattish initial pullback signals still muted selling pressure near record territory.
Tactically, initial support (3,783) is followed by an inflection point, circa 3,764.
Meanwhile, the Dow Jones Industrial Average has also sustained its January breakout, notching three straight closes atop the 31,000 mark.
The prevailing bull flag -- the tight four-session range, near record highs -- is a bullish continuation pattern.
Slightly more broadly, the breakout punctuates a successful test of major support (29,964) on the year's first session.
Against this backdrop, the Nasdaq Composite has registered three straight closes atop the 13,000 mark.
To reiterate, the breakout point (12,973) marks a notable floor, and is followed by the Nasdaq's former projected target (12,920).
Delving deeper, the prevailing upturn punctuates a successful first-day-of-the year test of major support (12,607).
Widening the view to six months adds perspective.
On this wider view, the Nasdaq is digesting its January break to record territory. Recall that the initial spike marked a 1.8% breakout, confirming the Nasdaq's primary uptrend.
Tactically, the breakout point (12,973) pivots to support.
Delving deeper, the prevailing upturn originates from the 20-day moving average -- a widely-tracked near-term trending indicator -- and the former breakout point (12,607).
Looking elsewhere, the Dow Jones Industrial Average has sustained a more decisive break to record highs.
Consider that Monday's modest downturn snapped a stretch of three straight closes atop the 20-day Bollinger bands () to conclude a statistically unusual two standard deviation breakout.
As always, consecutive closes atop the Bollinger bands signal a tension between time horizons.
For the near-term, the index is extended -- and due to consolidate -- following a break outside the range encompassing two standard deviations of its trailing 20-day price volatility.
But more importantly, the decisive upside spike signals extreme bullish momentum, a backdrop likely to precede longer-term upside follow-through.
Meanwhile, the S&P 500 has also taken flight.
Its January breakout has encompassed two straight closes atop the 20-day volatility bands () amid an unusually strong January breakout.
The bigger picture
Collectively, the major U.S. benchmarks are off to a bullish 2021 start.
On a headline basis, each big three U.S. benchmark has knifed to all-time highs -- previously uncharted territory -- rising from a successful early-January test of the 20-day moving average.
As always, the 20-day moving average is a widely-tracked near-term trending indicator.
Moreover, the subsequent rally from the 20-day moving average has been fueled by statistically unusual bullish momentum. Each big three benchmark has staged a two standard deviation breakout.
(On a granular note, the Dow Jones Industrial Average notched three straight closes atop the 20-day volatility bands, the S&P 500 registered two straight closes atop the 20-day bands, and the Nasdaq Composite managed a less reliable, but still bullish, lone close atop the bands.)
Moving to the small-caps, the iShares Russell 2000 ETF (IWM) is digesting an unusually strong January spike.
Recall that its nearly 3.5% breakout confirms the primary uptrend.
More immediately, the prevailing pullback has been flat, fueled by decreased volume, likely laying the groundwork for longer-term follow-through.
Similarly, the SPDR S&P MidCap 400 ETF (MDY) has taken flight, knifing to record highs.
Combined, the decisive small- and mid-cap breakouts are consistent with a bullish rotational market backdrop.
Looking elsewhere, the SPDR Trust S&P 500 (SPY) has broken out less decisively, rising about 1.2% atop the 2020 peak.
Still, the breakout is nominally respectable, and sufficient to confirm the primary uptrend.
Placing a finer point on the S&P 500, the index has sustained its latest break to all-time highs.
To reiterate, initial support (3,783) is followed by an inflection point, circa 3,764.
Delving deeper, the 3,723-to-3,726 area marks the S&P's first significant floor.
Widening to the six-month view, the S&P 500 has knifed to what will likely mark a higher plateau, atop the December peak. The prevailing upturn originates from the 20-day moving average.
Against this backdrop, the prevailing breakout has encompassed consecutive closes atop the 20-day Bollinger bands (), signaling statistically unusual bullish momentum.
Though still near-term extended -- and a consolidation phase remains underway -- the S&P 500's intermediate-term outlook remains comfortably bullish.
Also see: Charting a bull-trend whipsaw, S&P 500 absorbs pullback from record highs ().
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 10-year Treasury note yield has taken flight to start 2021, staging a likely consequential technical breakout.
In the process, the yield has extended its spike atop the marquee 1.00% mark
Tactically, the breakout confirms the yield's late-2020 uptrend, detailed previously (). The upturn punctuates an orderly December range, as well as a bullish triangle hinged to the late-November low.
More broadly, the upturn punctuates a massive double bottom, defined by the April and August lows. (See the one-year chart ().) The rally above the former range top (0.97) has indeed produced swift upside follow-through.
On further strength, the March peak (1.27) remains a potential upside target, and is closely followed by the 2016 low (1.34). (Also see the Nov. 9 review () and Dec. 3 review ( ).)
Looking elsewhere, the United States Oil Fund (USO) has also staged a January breakout. The fund tracks daily changes in the spot price of light, sweet crude oil.
The shares initially spiked about two months ago, gapping atop trendline resistance amid optimism that vaccine progress will promote global economic growth. The subsequent grinding-higher follow-through places the shares at eight-month highs.
Tactically, near-term support (33.50) is followed by the former breakout point (31.00) an area toward which the 50-day moving average is rising. The 50-day has marked a bull-bear inflection point, and a sustained posture higher signals a bullish bias.
More broadly, rising oil prices and interest rates (yields) would conventionally present a broad-market headwind. But against the prevailing backdrop, the resurgence more likely signals a reflation trade, an expected return toward pre-virus economic conditions.
Initially profiled July 23, Advanced Micro Devices, Inc. (AMD) has returned 57.4% and remains well positioned.
As illustrated, the shares have rallied to the range top, rising to challenge all-time highs. (Monday's close (97.25) marked a record close, by a narrow 13-cent margin.)
The upturn punctuates a relatively tight six-week range, laying the groundwork for a potentially decisive breakout. A near-term target projects to the 104 area on follow-through.
2021-01-12 17:54:00 GMT MW Charting a decisive 2021 breakout: U.S. -2-
More broadly, recall that the late-2020 range is hinged to massive July breakout. (See the one-year chart ().) The prevailing rally attempt is intact barring a violation of the range bottom (88.70).
Cisco Systems, Inc. (CSCO) is a large-cap name setting up well for the near-term. (Yield = 3.3%.)
Technically, the shares have rallied to challenge four-month highs amid a January upturn. A near-term target projects to the 47 area on follow-through.
Conversely, notable support, circa 43.70, closely matches the August gap. A sustained posture higher signals a bullish bias.
Also notice the pending golden cross -- or bullish 50-day/200-day moving average crossover -- signaling that the intermediate-term uptrend has overtaken the longer-term trend.
Finally, SolarEdge Technologies, Inc. (SEDG) is a well positioned Israel-based large-cap name.
Earlier this month, the shares knifed to record highs, rising amid a volume spike after the Georgia runoff Senate elections.
The ensuing pullback has been orderly, fueled by decreased volume, placing the shares near the breakout point (335.50) and 7.1% under the January peak.
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. ()
-Michael Ashbaugh; 415-439-6400; AskNewswires@dowjones.com
Company Symbol* (Click symbol for chart.) Date Profiled Chegg, Inc. CHGG Jan. 11 Ambarella, Inc. AMBA Jan. 11 Macy's, Inc. M Jan. 11 Nexstar Media Group, Inc. NXST Jan. 11 iShares Transportation Average ETF IYT Jan. 11 Energy Select Sector SPDR XLE Jan. 8 Teledoc Health, Inc. TDOC Jan. 8 Dollar Tree, Inc. DLTR Jan. 8 Skyworks Solutions, Inc. SWKS Jan. 7 DexCom, Inc. DXCM Jan. 7 Financial Select Sector SPDR XLF Jan. 7 Devon Energy Corp. DVN Jan. 6 Alcoa Corp. AA Jan. 6 FireEye, Inc. FEYE Jan. 5 Check Point Software Technologies CHKP Jan. 4 Synaptics, Inc. SYNA Jan. 4 Ceridian HCM Holding, Inc. CDAY Jan. 4 Lumentum Holdings, Inc. LITE Dec. 23 Sunrun, Inc. RUN Dec. 23 ShockWave Medical, Inc. SWAV Dec. 23 JPMorgan Chase & Co. JPM Dec. 22 Coupa Software, Inc. COUP Dec. 22 PagSeguro Digital Ltd. PAGS Dec. 22 Ballard Power Systems, Inc. BLDP Dec. 21 LivePerson, Inc. LPSN Dec. 21 United Therapeutics Corp. UTHR Dec. 21 Shopify, Inc. SHOP Dec. 18 CyberArk Software Ltd. CYBR Dec. 18 Apellis Pharmaceuticals, Inc. APLS Dec. 18 iShares Silver Trust SLV Dec. 17 Calix, Inc. CALX Dec. 17 Elastic N.V. ESTC Dec. 17 Cerner Corp. CERN Dec. 17 Universal Health Services, Inc. UHS Dec. 16 Tenet Healthcare Corp. THC Dec. 16 Sunnova Energy International, Inc. NOVA Dec. 16 Xilinx, Inc. XLNX Dec. 15 Netflix, Inc. NFLX Dec. 15 Toyota Motor Co. TM Dec. 15 Williams-Sonoma, Inc. WSM Dec. 15 iShares Nasdaq Biotechnology ETF IBB Dec. 15 SDPR S&P Regional Banking ETF KRE Dec. 14 Atlassian Corp. TEAM Dec. 14 Etsy, Inc. ETSY Dec. 14 Surface Oncology, Inc. SURF Dec. 14 Autodesk, Inc. ADSK Dec. 9 Monster Beverage Corp. MNST Dec. 9 Cimarex Energy Co. XEC Dec. 9 Plug Power, Inc. PLUG Dec. 9 F5 Networks, Inc. FFIV Dec. 8 Emerson Electric Co. EMR Dec. 8 Zscaler, Inc. ZS Dec. 7 Fortinet, Inc. FTNT Dec. 7 Kulicke and Soffa Industries, Inc. KLIC Dec. 7 Honeywell International, Inc. HON Dec. 7 Dillard's, Inc. DDS Dec. 4 Caleres, Inc. CAL Dec. 4 Spotify Technology S.A. SPOT Dec. 3 Align Technology, Inc. ALGN Dec. 3 Valero Energy Corp. VLO Dec. 3 Analog Devices, Inc. ADI Dec. 2 Cirrus Logic, Inc. CRUS Dec. 1 Sonos, Inc. SONO Dec. 1 Dollar Tree, Inc. DLTR Dec. 1 Nuance Communications, Inc. NUAN Nov. 30 Northern Trust Corp. NTRS Nov. 30 American Airlines Group, Inc. AAL Nov. 30 Microchip Technology, Inc. MCHP Nov. 24 Zillow Group, Inc. ZG Nov. 23 Yeti Holdings, Inc. YETI Nov. 23 Palo Alto Networks, Inc. PANW Nov. 20 Bank of America Corp. BAC Nov. 20 Eaton Corp. ETN Nov. 20 SPDR S&P Oil & Gas Exploration and Production ETF XOP Nov. 20 MetLife, Inc. MET Nov. 19 Hilton Worldwide Holdings, Inc. HLT Nov. 19 American Express Co. AXP Nov. 18 Kohl's Corp. KSS Nov. 18 FleetCor Technologies FLT Nov. 18 Applied Materials, Inc. AMAT Nov. 17 Delta Air Lines, Inc. DAL Nov. 17 Consumer Staples Select Sector SPDR XLP Nov. 17 Ross Stores, Inc. ROST Nov. 16 RingCentral, Inc. RNG Nov. 13 Regions Financial Corp. RF Nov. 13 iShares Europe ETF IEV Nov. 13 Flex, Inc. FLEX Nov. 9
2021-01-12 17:54:00 GMT MW Charting a decisive 2021 breakout: U.S. -3-
Snap, Inc. SNAP Nov. 9 Norfolk Southern Corp. NSC Nov. 9 Communications Services Select Sector SPDR XLC Nov. 5 Health Care Select Sector SPDR XLV Nov. 5 Alphabet, Inc. GOOGL Nov. 5 Uber Technologies, Inc. UBER Nov. 5 Keysight Technologies, Inc. KEYS Nov. 4 Harley-Davidson, Inc. HOG Nov. 4 Garmin, Ltd. GRMN Nov. 4 Pinterest, Inc. PINS Nov. 3 Sony Corp. SNE Nov. 3 8x8, Inc. EGHT Nov. 3 Exact Sciences Corp. EXAS Nov. 2 Universal Display Corp. OLED Nov. 2 Dentsply Sirona, Inc. XRAY Oct. 27 Maxim Integrated Products, Inc. MXIM Oct. 21 The Travelers Companies, Inc. TRV Oct. 21 Micron Technology, Inc. MU Oct. 20 Vulcan Materials Co. VMC Oct. 19 ON Semiconductor Corp. ON Oct. 16 Ford Motor Co. F Oct. 15 Texas Instruments, Inc. TXN Oct. 15 First Solar, Inc. FSLR Oct. 13 Nevro Corp. NVRO Oct. 12 Teradyne, Inc. TER Oct. 12 SPDR S&P Homebuilders ETF XHB Oct. 9 Shake Shack, Inc. SHAK Oct. 9 SPDR S&P Biotech ETF XBI Oct. 8 Twilio, Inc. TWLO Oct. 8 Cloudflare, Inc. NET Oct. 7 Ceridian HCM Holding, Inc. CDAY Oct. 7 RSailPoint Technology Holdings, Inc. SAIL Oct. 1 Martin Marietta Materials, Inc. MLM Sept. 30 Abercrombie & Fitch Co. ANF Sept. 29 Zendesk, Inc. ZEN Sept. 23 Scientific Games Corp. SGMS Sept. 23 Crocs, Inc. CROX Sept. 14 Five Below, Inc. FIVE Sept. 10 Eastman Chemical Co. EMN Sept. 10 International Paper Co. IP Sept. 3 Anaplan, Inc. PLAN Sept. 2 Celanese Corp. CE Aug. 26 Westlake Chemical Corp. WLK Aug. 25 Deere & Co. DE Aug. 24 Expedia Group, Inc. EXPE Aug. 24 Johnson Controls International JCI Aug. 21 Canadian Solar, Inc. CSIQ Aug. 20 General Motors Co. GM Aug. 20 Starbucks Corp. SBUX Aug. 18 Builders FirstSource, Inc. BLDR Aug. 18 Steel Dynamics, Inc. STLD Aug. 17 Brinker International, Inc. EAT Aug. 13 Enphase Energy, Inc. ENPH Aug. 13 Nucor Corp. NUE Aug. 11 Freeport McMoRan, Inc. FCX Aug. 10 Natera, Inc. NTRA Aug. 10 Industrial Select Sector SPDR XLI Aug. 6 Penn National Gaming, Inc. PENN July 30 Procter & Gamble Co. PG July 29 SPDR S&P Metals & Mining ETF XME July 28 iShares MSCI South Korea ETF EWY July 28 Advanced Micro Devices, Inc. AMD July 23 Materials Select Sector SPDR XLB July 20 Caterpillar, Inc. CAT July 20 Roku, Inc. ROKU July 16 Cognizant Technology Solutions, Inc. CTSH July 16 Consumer Discretionary Select Sector SPDR XLY July 13 SunPower Corp. SPWR July 13 Walmart, Inc. WMT July 8 Danaher Corp. DHR June 24 Fiverr International, Ltd. FVRR June 19 HubSpot, Inc. HUBS June 8 Square, Inc. SQ June 8 SPDR S&P Retail ETF XRT June 3 iShares MSCI Japan ETF EWJ May 29 Synopsis, Inc. SNPS May 27 Agilent Technologies, Inc. A May 15 Qualcomm, Inc. QCOM May 12 ServiceNow, Inc. NOW Apr. 27 Five9, Inc. FIVN Apr. 24 Chewy, Inc. CHWY Apr. 24 Tesla, Inc. TSLA Apr. 23 VanEck Vectors Semiconductor ETF SMH Apr. 17 Okta, Inc. OKTA Apr. 16 Target Corp. TGT Apr. 16 Invesco QQQ Trust QQQ Apr. 14 Apple, Inc. AAPL Mar. 27 Nvidia Corp. NVDA Mar. 27 iShares MSCI Emerging Markets ETF EEM Mar. 19 Microsoft Corp. MSFT Feb. 22 * Click each symbol for current chart.
(END) Dow Jones Newswires
January 12, 2021 12:54 ET (17:54 GMT)
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