Malcolm Graham
All posts from Malcolm Graham
Malcolm Graham in Analytics & more!,

Strong bull trend reaches latest technical test

Also: Technology bellwethers diverge, AAPL, GOOGL, BBRY, NXPI, STLD, WLT

The S&P 500 Index has completely flatlined of late, notching five straight one-point daily moves.

Against this backdrop, the small- and mid-cap benchmarks are challenging major resistance, areas that define the immediate bull-bear battleground.

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 established an orderly one-week trading range.

The range top marks its all-time high, and the index is challenging this area in Tuesday’s early action.

Meanwhile, the Dow industrials’ near-term backdrop is similar.

Here again, the index has pulled in modestly from its record high of 17,705, established last week.

From current levels, first support holds just under 17,540, a level matching last week’s low.

And the Nasdaq Composite has sustained a break to 14-year highs.

The index bottomed Monday at 4,655 — matching its breakout point — and has initially drawn buyers in this area. Bullish price action.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its latest runaway gap.

Broadly speaking, its first notable support rests at 4,654, and is followed by a significant floor around the September peak.

Moving to the Dow, its straightline four-week spike is longer-term bullish.

As detailed previously, its first significant support rests at the September peak, spanning from 17,280 to 17,350. (The November low holds at 17,278.)

And the S&P 500 Index has sustained a less-decisive break to record territory.

Near-term support now rests at last week’s low of 2,030, and is followed by a firmer floor at the September peak.

The bigger picture

The S&P 500 has completely flatlined of late, notching five straight one-point daily moves.

But against this backdrop, notable technical tests are taking shape elsewhere.

Returning to the small-caps, the iShares Russell 2000 IWM, -1.07% has balked at the September peak of 117.90. (The September peaks previously marked hurdles for the widely-tracked benchmarks.)

The IWM topped last week just above resistance, and has reversed respectably.

Still, recent weakness has been driven by decreased volume, and the shares have maintained a posture atop trendline support. The IWM’s technical bias points higher barring a violation of this area.

More notably, the SPDR S&P MidCap 400 MDY, -0.34% has drawn sellers at major resistance.

As detailed previously, two hurdles stand out:

  • Resistance at the MDY’s all-time closing high of 262.60.
  • The MDY’s absolute record peak of 264.00.

Against this backdrop, the MDY topped last week at 262.54 — fractionally under its all-time closing high — before pulling in from the range top.

But here again, the initial pullback has been flat, driven by lukewarm volume, pointing to limited selling pressure.

So collectively, the small- and mid-cap benchmarks have reached the U.S. markets' latest technical test.

Meanwhile, the widely-tracked U.S. benchmarks have sustained recent breakouts, while the sub-sector price action remains bullish.

Broadly speaking, the U.S. markets’ longer-term bias points firmly higher, though the small- and mid-caps’ technical tests define the immediate bull-bear battleground.

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.

Large-cap technology bellwethers diverge

Drilling down further, two technology bellwethers have diverged.

To start, Google, Inc. GOOGL, +0.49% has failed a technical test.

Specifically, the shares have drawn sellers at the breakdown point, a level matching the major moving averages.

Moreover, Google has notched a “lower low” this week, also signaling a downtrend. Its path of least resistance technically points lower pending a close atop the November peak.

Conversely, Apple Inc’s AAPL, -0.69% backdrop is almost self-explanatory.

Shares in the world’s largest company have paced the market recovery, breaking decisively to all-time highs.

Though near-term extended, a pullback toward first support — around 110 — would offer an attractive entry. Apple is also well positioned on the weekly chart.

Looking elsewhere, Blackberry Limited BBRY, -5.30% is a large-cap name positioned to rise.

Technically, the shares have recently knifed to 52-week highs, rising after management announced a partnership with Samsung, and introduced new products, including Blackberry Classic.

The ensuing pullback has been driven by lighter volume, placing the shares at an attractive entry near support, and 14.6% under the November peak.

NXP Semiconductors NXPI, -2.08% is a well positioned large-cap name.

Earlier this month, the shares rallied to all-time highs, clearing resistance at the September peak.

Since then, it’s established a bullish flag, and its tight two-week range positions the shares to build on the initial breakout.

Steel Dynamics, Inc. STLD, -3.00% is a large-cap name positioned to rise. (Yield = 2.0%.)

As illustrated, the shares have maintained support at the 200-day moving average, rising to challenge the breakdown point.

Its tight November range points to limited selling pressure — and it’s edged atop the 50-day moving average this week — positioning the shares for a potential breakout. The risk/reward can be favorable from current levels with a stop at this month’s low.

Walter Energy, Inc. WLT, +2.73% is a small-cap name coming to life.

Technically, the shares have recently knifed to two-month highs, also clearing the 50-day moving average.

The ensuing pullback has been driven by lighter volume, placing the shares at an attractive entry near support, and 19% under the November peak.

Michael Ashbaugh