Charting the S&P 500’s November bounce ahead of U.S. midterms


Technically speaking, the U.S. markets’ lukewarm November bounce is intact.

Against this backdrop, each big three benchmark has sustained a break atop trendline resistance, and selling pressure remains muted ahead of the midterm elections.

Before detailing the U.S. markets’ wider view, the S&P 500’s

SPX, +0.47%

 hourly chart highlights the past two weeks.

As illustrated, the S&P has sustained its November reversal, a move that technically started on Oct. 31.

Familiar resistance matches the May peak (2,742) and is followed by the 200-day moving average, currently 2,764.

Similarly, the Dow Jones Industrial Average has sustained a break atop trendline resistance.

In its case, the 200-day moving average, currently 25,118, has offered support. Recent muted selling pressure near the range top is near-term constructive.

Meanwhile, the Nasdaq Composite is also digesting the Oct. 31 gap higher.

Tactically, the index has maintained first support (7,274) closely matching the top of the gap.

Conversely, the Nasdaq remains capped by major resistance (7,474), an area better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has initially balked at its breakdown point. Recall that significant resistance broadly spans from 7,474 to the 200-day moving average, currently 7,518.

Last week’s high (7,466) registered slightly under resistance, and the index has pulled in. An eventual close atop the 200-day moving average would strengthen the bull case.

Looking elsewhere, the Dow Jones Industrial Average has extended its rally from three-month lows.

This is the lone widely-tracked U.S. benchmark positioned atop its 200-day moving average.

On further strength, more distant overhead rests at the post-breakdown peak (25,817) and the August gap (25,882), the latter closely matching the 50-day moving average.

Similarly, the S&P 500 has extended its recovery attempt, reclaiming the 2,710 mark.

To reiterate, additional overhead matches the May peak (2,742) and the more distant 200-day moving average, currently 2,764.

The bigger picture

As detailed above, the U.S. benchmarks’ November recovery attempt remains underway. Each big three benchmark has reclaimed trendline resistance, and selling pressure remains muted ahead of the midterm elections.

Moving to the small-caps, the iShares Russell 2000 ETF

IWM, +0.59%

 has rallied from eight-month lows, rising to retest its breakdown point.

Tactically, resistance spans from about 152.46 to 153.00, the former matching the 2017 close. More distant overhead matches the post-breakdown peak (158.86).

Similarly, the SPDR S&P MidCap 400 has reversed from eight-month lows.

In its case, resistance spans from 337.90 to 339.00, levels matching gap resistance and the breakdown point.

More broadly, the small- and mid-cap benchmarks are both rising amid decreased volume, raising a question as to the rally’s durability.

Looking elsewhere, the SPDR Trust S&P 500

SPY, +0.49%

 has rallied from six-month lows.

To reiterate, major resistance matches the May peak (274.25) and is followed by the 200-day moving average, currently 276.10.

Conversely, notable support broadly spans from about 269.60 to 270.12, an area matching the late-October gap

Against this backdrop, the S&P 500 is also rising in the wake of a damaging October downdraft.

Notable support broadly spans from 2,695 to 2,710, the former matching the 2017 peak. The S&P’s recovery attempt gets the benefit of the doubt barring a violation.

Conversely, familiar resistance matches the May peak (2,742) and the slightly more distant 200-day moving average, currently 2,764. An eventual close higher would raise the flag to a more legitimate rally attempt.

As always, it’s not just what the markets do, it’s how they do it. The pending retests of resistance are worth tracking.

More broadly, the S&P 500’s recovery attempt is intact — a near-term bounce remains underway — against a still bearish intermediate- to longer-term technical bias. The response to the U.S. midterm elections, and the Federal Reserve’s policy directive, due out Thursday, will likely add color.

See also: Charting a second dead-cat bounce, S&P 500 rises from 10% correction mark.

See also: Cracks surface in the bull trend, S&P 500 nails major support.

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

TNX, +0.47%

 has asserted a higher plateau.

Recall that the yield initially spiked to start October, a move that contributed to, if not outright caused, the broad-market downdraft. (Higher interest rates depress economic activity, including for instance in the retail sector, autos and housing.)

The subsequent consolidation phase has been underpinned by the breakout point (3.11). Tactically, the chart illustrates a continuation pattern. An intermediate-term target projects to the 3.45 area on a break from the range top (3.25).

Much more broadly, the yield is pressing its 200-month moving average, currently 3.20 — illustrated on the 22-year chart — a level that has capped the yield on a closing basis since 1987. The retest exemplifies that it is not only higher yields that present a headwind, but also the relatively rapid rate of change.

Looking elsewhere, the SPDR Gold Shares ETF

GLD, -0.36%

 is digesting the October breakout.

As illustrated, the shares initially spiked three weeks ago, gapping sharply atop trendline resistance amid a flight-to-safety.

The subsequent pullback has been orderly, underpinned by the breakout point (114.65). Tactically, the ascending 50-day moving average closely matches support, and gold’s rally attempt is intact barring a violation.

Moving to U.S. sectors, the Consumer Staples Select Sector SPDR

XLP, +0.42%

 remains a rare pocket of sector strength. (Yield = 2.8%.)

Late last month, the group gapped atop the 50-day moving average, rising after a strong batch of sector earnings reports. (See, for example, Procter & Gamble Co.)

The subsequent tight range has been punctuated by an early-November breakout. Tactically, the former range top pivots to support (55.30) and is closely followed by the 50-day moving average, a recent inflection point. A posture higher supports a bullish bias.

Revisiting extensive U.S. sector damage

Looking elsewhere, the October market downdraft inflicted extensive sub-sector damage. Three groups exemplify the repair process, only recently underway:

To start, the Industrial Select Sector SPDR

XLI, +0.92%

 has reversed from 14-month lows.

Recall that significant resistance matches the breakdown point, circa 71.00. This area formerly underpinned a massive double top — illustrated on the three-year chart — and a sustained break higher would mark technical progress.

On further strength, additional overhead spans from about 72.60 to 73.00.

Meanwhile, the Materials Select Sector SPDR

XLB, +1.44%

 has spiked from 21-month lows.

Still, the upturn has been fueled by decreased volume, raising a question as to the rally’s sustainability.

Tactically, initial resistance matches the post-breakdown peak (54.68) and is followed by the firmer breakdown point, circa 56.90. An eventual close atop the latter would neutralize the October breakdown.

Finally, the iShares Transportation Average ETF

IYT, +0.80%

 is also retesting its breakdown point, circa 186.60.

Here again, the rally attempt has been fueled by lackluster volume — at least so far.

On further strength, the more distant 200-day moving average, currently 192.90, remains an inflection point. The transports’ initial breakdown was punctuated by a failed mid-October retest from underneath. An eventual close atop the 200-day would strengthen the bull case.

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.

Company Symbol Date Profiled
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
Ross Stores, Inc. ROST 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
L Brands, Inc. LB Oct. 19
Ericsson ERIC Oct. 19
Euronet Worldwide, Inc. EEFT Oct. 18
Yum! Brands, Inc. YUM Oct. 18
Agnico Eagle Mines Limited AEM Oct. 18
Eli Lilly & Co. LLY Oct. 17
Dollar General Corp. DG Oct. 17
SPDR Gold Shares ETF GLD Oct. 16
VanEck Vectors Gold Miners ETF GDX Oct. 16
CME Group, Inc. CME Oct. 8
Gogo, Inc GOGO Oct. 4
Dunkin’ Brands Group, Inc. DNKN Sept. 26
FireEye, Inc. FEYE Sept. 25
Glaukos Corp. GKOS Sept. 19
Verizon Communications, Inc. VZ Sept. 13
Jacobs Engineering Group, Inc. JEC Sept. 7
Nordstrom, Inc. JWN Aug. 31
Cisco Systems, Inc. CSCO Aug. 22
Boston Scientific Corp. BSX Aug. 22
T-Mobile US, Inc. TMUS Aug. 14
Clorox Co. CLX Aug. 10
Pfizer, Inc. PFE July 25
Five Below, Inc. FIVE July 17
Walmart, Inc. WMT July 16
Johnson & Johnson JNJ July 5
NII Holdings, Inc. NIHD June 29
Merck & Co., Inc. MRK June 21
Roku, Inc. ROKU June 12
Viking Therapeutics, Inc. VKTX June 12
Kohl’s Corp. KSS June 5
Twilio, Inc. TWLO May 21
UnitedHealth Group, Inc. UNH Apr. 30
TJX Companies, Inc. TJX Mar. 6
Motorola Solutions, Inc. MSI Nov. 14
Lululemon Athletica, Inc. LULU Oct. 24
Bottomline Technologies, Inc. EPAY July 13
Microsoft Corp. MSFT Aug. 5

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