By Michael Ashbaugh, MarketWatch
Focus: 10-year yield takes flight amid risk-on trade, Transports hold trendline support, TNX, IYT, MSI, GPS, NOVA
Broadly speaking, the major U.S. benchmarks are off to a constructive October start, reclaiming key technical levels.
Against this backdrop, the S&P 500 has asserted a bullish-leaning intermediate-term bias, rising to three-week highs from a successful test of major support (3,328).
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, reaching three-week highs.
The prevailing upturn punctuates last week's range, underpinned by major support (3,328).
From current levels, the breakout point (3,393) marks a near-term floor, a level matching the February peak.
Similarly, the Dow Jones Industrial Average has cleared its range top.
Here again, the breakout punctuates a successful test of major support (27,447) a level that underpinned last week's price action on a closing basis.
More immediately, the 28,000 mark remains an inflection point.
Meanwhile, the Nasdaq Composite is challenging its range top.
The prevailing upturn punctuates a jagged, but successful, test of the 50-day moving average, an area better illustrated on the daily chart below.
Tactically, a notable floor matches the mid-September range top (11,245).
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended its rally attempt, notching a "higher high" versus the mid-September peak (11,245).
The prevailing upturn punctuates a successful test of the 50-day moving average, currently 11,113, a recent bull-bear inflection point.
Tactically, the sustained break atop the 50-day moving average -- combined with a "higher high" to start October -- signals a bullish-leaning intermediate-term bias.
Looking elsewhere, the Dow Jones Industrial Average has extended a rally atop key resistance.
The specific area matches the breakdown point (27,580) and the 50-day moving average, currently 27,684.
The Dow's sustained rally atop resistance signals a bullish-leaning intermediate-term bias. Recall that the 50-day moving average defined the May, June and late-July lows.
Meanwhile, the S&P 500 has also extended its rally attempt, edging atop next resistance (3,393).
In the process, the S&P has reclaimed its 50-day moving average, currently 3,369.
Slightly more broadly, the upturn punctuates a successful test of major support (3,328), a bull-bear inflection point detailed repeatedly.
The bigger picture
Collectively, the major U.S. benchmarks are acting well technically to start October, and the fourth quarter.
On a headline basis, the S&P 500 and Dow industrials have extended their rally attempts, rising from successful tests of major support -- S&P 3,328 and Dow 27,447. (See the hourly charts.)
Moving to the small-caps, the iShares Russell 2000 ETF has extended a rally from the September low.
In the process, the small-cap benchmark has reclaimed its 50-day moving average and the breakdown point (153.39).
The breakout neutralizes the September downdraft. Tactically, additional overhead matches the August peak (159.82).
Meanwhile, the SPDR S&P MidCap 400 ETF has also reclaimed its 50-day moving average.
The prevailing follow-through punctuates an October upturn initially fueled by increased volume.
Looking elsewhere, the SPDR Trust S&P 500 (SPY) has also rallied atop major resistance.
The specific area matches its former breakout point (338.35) and the 50-day moving average, currently 336.35.
Recall that the prevailing upturn originates from major support matching the June peak.
Placing a finer point on the S&P 500, its near-term backdrop is increasingly straightforward.
To start, the S&P has rallied from major support (3,328), a bull-bear inflection point detailed repeatedly (). This area effectively underpinned last week's range.
Within the range, the 50-day moving average, currently 3,369, remains an inflection point.
Slightly more broadly, the S&P has edged atop the February peak (3,393), a level defining its former breakout point. This area pivots to near-term support.
On further strength, follow-through above the mid-September range top, circa 3,425, would mark a "higher high" incrementally strengthening the bull case.
Conversely, the S&P 500's 50-day moving average -- and major support (3,328) -- remain useful bull-bear inflection points. A sustained posture higher signals a bullish-leaning intermediate-term bias.
Also see: Charting a corrective bounce: S&P 500 hesitates at 50-day average ().
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 knifed to its best levels since June, rising amid a risk-on trade. (Treasury yields and bond prices are inversely correlated. Lower bond prices signal increased investor risk appetite.)
The October upturn punctuates a tight seven-week range, underpinned by the 50-day moving average.
Tactically, the upturn places the yield's range top (0.79) -- a level closely matching the April peak -- firmly under siege. Tuesday's early session high (0.792) has matched resistance.
As detailed repeatedly, follow-through above the range top would open the path to a less-charted patch amid a developing double bottom. Such a move could be punctuated by swift upside follow-through. (See the mid-June spike.)
Conversely, a downside inflection point matches the yield's former range top (0.75). The prevailing breakout attempt is intact barring a violation. (Also see the Aug. 28 review () and Sept. 23 review ( ).)
Moving to U.S. sectors, the iShares Transportation Average (IYT) is acting well technically.
The group initially spiked two months ago, staging a steep early-August breakout. The upturn marked a two standard deviation breakout, encompassing four straight closes atop the 20-day Bollinger bands ().
More immediately, the group has asserted an orderly six-week range -- a bullish continuation pattern -- positioning it to build on the steep August rally.
Tactically, trendline support closely tracks the 50-day moving average, and is followed by the former breakout point (190.00). A posture higher signals a bullish intermediate-term bias.
Moving to specific names, Motorola Solutions, Inc. (MSI) is a well positioned large-cap name.
Technically, the shares are challenging seven-month highs, rising from a double bottom defined by the May and July lows.
The prevailing tight one-week range signals muted selling pressure near resistance, improving the chances of eventual follow-through. Tactically, a breakout attempt is in play barring a violation of the October low (153.70).
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.
Gap, Inc. (GPS) is a large-cap retailer coming to life.
As illustrated, the shares have knifed to 52-week highs, clearing resistance matching the September peak. The upturn originates from trendline support closely tracking the 50-day moving average.
Though near-term extended, and due to consolidate, a pullback toward the breakout point (18.40) would offer an attractive entry.
More broadly, the shares are well positioned on the three-year chart, () edging atop major resistance matching the late-2019 range top.
Finally, Sunnova Energy International, Inc. (NOVA) -- public since July 2019 -- is a mid-cap developer of residential-solar and energy-storage solutions.
Late last month, the shares knifed to record highs, clearing the August peak amid a volume spike.
The subsequent pullback has been underpinned by the breakout point (28.60), placing the shares 14.9% under the October peak.
Tactically, deeper support matches the August and September gaps, circa 27.20. A sustained posture higher signals a bullish bias.
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. ()
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October 06, 2020 12:38 ET (16:38 GMT)
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