Charting a bullish reversal, S&P 500 extends rally from 50-day average

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U.S. stocks are higher early Friday, rising after a market-friendly batch of economic data.

Against this backdrop, the S&P 500 has extended a rally from its 50-day moving average, while the Nasdaq Composite seems to have narrowly survived a test of key support matching the 2020 peak (12,973). The weekly close will likely add color.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +1.66%  hourly chart highlights the past two weeks.

As illustrated, the S&P has weathered a jagged test of major support (3,870) closely matching the 50-day moving average, currently 3,873.

The bullish reversal from support — also illustrated on the daily chart — preserves a comfortably bullish intermediate-term bias.

Meanwhile, the Dow Jones Industrial Average DJIA, +1.39%  remains the strongest major benchmark.

Technically, the index has reversed sharply from two-week lows, rising to the former range.

On further strength, the 32,800 area remains a near-term inflection point.

Against this backdrop, the Nasdaq Composite COMP, +1.24% has reached a potentially consequential technical test.

As detailed repeatedly, major support matches the 2020 peak (12,973), a bull-bear inflection point also illustrated on the daily chart below.

Thursday’s close (12,977) registered narrowly atop support amid a retest that remains underway.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has whipsawed this week at major support (12,973).

The specific area matches the 2020 peak (12,973) a level that also marked the early-March breakdown point. (Recall the initial violation of the 2020 peak punctuated a head-and-shoulders top, a bearish pattern that has been at least temporarily neutralized by the swift reversal back to the range, fueled by two 7-to-1 up days.)

The Nasdaq’s response to major support (12,973) — potentially across the next several sessions — should be a useful intermediate-term bull-bear gauge.

Delving deeper, significant support (12,607) closely matches the March closing low (12,609). (See for instance, the Jan. 11 review.)

Looking elsewhere, the Dow Jones Industrial Average remains the strongest major benchmark.

Consider that the week-to-date low (32,071) has registered comfortably atop the breakout point (32,009) an area marking the Dow’s first notable floor.

The pronounced bullish reversal from support — punctuated by a session close 548 points above the session low — is technically constructive.

Delving deeper, the 50-day moving average, currently 31,567, is rising toward the former range top, circa 31,650.

Meanwhile, the S&P 500 has weathered a noteworthy technical test this week.

To reiterate, the index has registered a bullish reversal from major support (3,870) closely matching the 50-day moving average, currently 3,873.

Conversely, recall that the week-to-date price action has been capped by the breakdown point (3,950).

The bigger picture

As detailed above, each big three U.S. benchmark has just weathered a key technical test.

On a headline basis, the S&P 500 has maintained its 50-day moving average, while the Nasdaq Composite has survived a retest of the 2020 peak (12,973) — by the skin of its teeth.

Meanwhile, the Dow Jones Industrial Average remains the strongest major benchmark, reversing sharply from its breakout point (32,009).

Combined, the S&P 500 and Dow industrials have retained a bullish intermediate-term bias.

The Nasdaq’s intermediate-term bias arguably hinges on its response to the 2020 peak (12,973). An extended retest of this area remains underway.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +1.82%  has registered a bullish reversal amid a volume spike.

Tactically, the range bottom (216.70) marks an inflection point, detailed previously.

Thursday’s close (216.66) registered nearby, and the small-cap benchmark has followed through to its former range early Friday.

Tactically, the 50-day moving average, currently 220.50, marks an overhead inflection point.

Meanwhile, the SPDR S&P MidCap 400 ETF MDY, +2.32%  remains incrementally stronger.

Consider that the MDY has formed a bullish engulfing pattern, rising from its range bottom.

Put differently, the session’s open and close — the long white bar — engulfed those of the prior session. The MDY’s successful retest, and bullish reversal, are technically constructive.

Looking elsewhere, the SPDR Trust S&P 500 SPY, +1.61%  has maintained support closely matching the 50-day moving average.

The bullish reversal registered amid a volume uptick.

More broadly, the SPY has preserved a seven-week range, punctuated by modest March breaks both higher and lower.

Placing a finer point on the S&P 500, the index has reversed respectably from major support.

The familiar area matches the S&P’s former breakout point (3,870) and the 50-day moving average, currently 3,873.

Conversely, the S&P’s breakdown point (3,950) has marked an overhead sticking point.

More broadly, the S&P 500 has staged a largely garden-variety late-March pullback.

The downturn has been underpinned by the range bottom, an area matching the Jan. peak (3,870) and 50-day moving average. The bullish reversal from support — fueled by increased volume — is constructive.

Limited technical damage has been inflicted in the broad sweep.

Separately, the index has preserved a series of “higher highs” and “higher lows” also signaling an intermediate-term uptrend. The S&P’s intermediate-term bias remains bullish, based on today’s backdrop, pending more aggressive selling pressure. (Also see Thursday’s review for added detail on deeper inflection points.)

Friday’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 United States Oil Fund USO, +4.11%  has pulled in to a key technical test The fund tracks daily changes in the spot price of light, sweet crude oil.

Fundamentally, the shares initially turned lower amid concerns over Europe’s virus surge, and the prospect of renewed economic lockdowns. Oil prices have subsequently stabilized, at least for the near-term, following a solid round of U.S. economic data and amid the Suez Canal debacle.

Technically, the shares have whipsawed this week near trendline support amid increased volume.

Notable support matches prevailing range bottom (39.30) and the 50-day moving average, currently 39.82. An eventual violation would mark a “lower low” — and punctuate a head-and-shoulders top — raising a caution flag.

The USO’s intermediate-term bias remains guardedly-bullish, based on today’s backdrop, barring downside follow-through.

Moving to specific names, Home Depot, Inc. HD, +2.23%  is a Dow 30 component coming to life. (Yield = 2.2%.)

As illustrated, the shares have knifed to record highs, punctuating a nearly straightline bullish reversal from the March low.

Underlying the upturn, its relative strength index (not illustrated) has tagged its best levels since August, improving the chances of longer-term follow-through.

Tactically, the breakout point (290.00) is followed by the former range top (285.80). The prevailing rally attempt is intact barring a violation.

More broadly, the shares are well positioned on the three-year chart, rising from a prolonged continuation pattern hinged to the massive 2020 V-shaped reversal.

Initially profiled Nov. 17, Applied Materials, Inc. AMAT, +7.45%  has returned 60.7% and remains well positioned.

Earlier this week, the shares knifed to the range top, rising after the company announced a $7.5 billion share buyback plan.

Slightly more broadly, recent persistence near the range top — amid comparably sluggish semiconductor sector price action — improves the chances of an eventual breakout.

Tactically, the 50-day moving average, currently 111.70, is rising toward the prevailing range bottom (112.15). A breakout attempt is in play barring a violation.

Ferrari N.V. RACE, +0.15%  is a large-cap Italy-based luxury and performance auto manufacturer.

The shares started the week with a breakout, knifing atop trendline resistance and the 50-day moving average.

The subsequent pullback has been comparably flat, placing the shares 2.7% under the March peak.

Tactically, the former breakdown point, circa 200, has underpinned the prevailing pullback and is closely followed by the 200-day moving average, currently 196.00. The rally attempt is intact barring a violation.

Finally, Inc. Funko, Inc. FNKO, -6.48%  is a small-cap maker of pop-culture collectibles.

The shares have come to life of late, rising after the company signaled its intention to enter the non-fungible token (NFT) market.

Technically, the shares are near-term extended — following a two standard deviation breakout — though the aggressive strong-volume spike likely lays the groundwork for longer-term follow-through.

Tactically, the mid-March peak is followed by the firmer breakout point (18.83).

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* (Click symbol for chart.) Date Profiled
Cisco Systems, Inc. CSCO Mar. 25
Steel Dynamics, Inc. STLD Mar. 25
Procter & Gamble Co. PG Mar. 25
Consumer Staples Select Sector SPDR XLP Mar. 25
iShares U.S. Home Construction ETF ITB Mar. 23
Lennar Corp. LEN Mar. 23
Jabil Circuit, Inc. JBL Mar. 23
Dish Network Corp. DISH Mar. 23
UnitedHealth Group, Inc. UNH Mar. 22
DraftKings, Inc. DKNG Mar. 22
Shift4 Payments, Inc. FOUR Mar. 19
Whirlpool Corp. WHR Mar. 19
U.S. Bancorp USB Mar. 19
Nasdaq, Inc. NDAQ Mar. 18
D.R. Horton, Inc. DHI Mar. 18
Facebook, Inc. FB Mar. 17
AutoNation, Inc. AN Mar. 17
McDonald’s Corp. MCD Mar. 16
Virtu Financial, Inc. VIRT Mar. 16
Spirit Airlines, Inc. SAVE Mar. 16
LKQ Corp. LKQ Mar. 15
Anthem, Inc. ANTM Mar. 15
Walgreens Boots Alliance, Inc. WBA Mar. 12
International Paper Co. IP Mar. 12
iShares Europe ETF IEV Mar. 11
CME Group, Inc. CME Mar. 11
3M Co. MMM Mar. 11
Southwest Airlines Co. LUV Mar. 10
Under Armour, Inc. UA Mar. 9
Big Lots, Inc. BIG Mar. 9
Alaska Air Group, Inc. ALK Mar. 9
State Street Corp. STT Mar. 8
American Eagle Outfitters, Inc. AEO Mar. 8
Hess Corp. HES Mar. 3
Beazer Homes USA, Inc. BZH Mar. 3
Mastercard, Inc. MA Mar. 2
Boeing Co. BA Mar. 2
Starbucks Corp. SBUX Mar. 1
Eaton Corp. ETN Feb. 25
Oracle Corp. ORCL Feb. 24
United Airlines Holdings, Inc. UAL Feb. 24
Nucor Corp. NUE Feb. 23
Signet Jewelers Limited SIG Feb. 23
Old Dominion Freight Line ODFL Feb. 22
Seagate Technology STX Feb. 19
Chevron Corp. CVX Feb. 18
Lyft, Inc. LYFT Feb. 16
Intel Corp. INTC Feb. 12
U.S. Global Jets ETF JETS Feb. 9
Motorola Solutions, Inc. MSI Feb. 9
KeyCorp KEY Feb. 5
Diamondback Energy, Inc. FANG Feb. 4
CarMax, Inc. KMX Feb. 3
Toll Brothers, Inc. TOL Feb. 2
Avis Budget Group, Inc. CAR Feb. 1
Capital One Financial Corp. COF Jan. 29
Cummins, Inc. CMI Jan. 25
Magna International, Inc. MGA Jan. 22
M.D.C. Holdings, Inc. MDC Jan. 22
Zebra Technologies Corp. ZBRA Jan. 14
Nexstar Media Group, Inc. NXST Jan. 11
iShares Transportation Average ETF IYT Jan. 11
Energy Select Sector SPDR XLE Jan. 8
Skyworks Solutions, Inc. SWKS Jan. 7
Financial Select Sector SPDR XLF Jan. 7
Synaptics, Inc. SYNA Jan. 4
JPMorgan Chase & Co. JPM Dec. 22
Williams-Sonoma, Inc. WSM Dec. 15
SDPR S&P Regional Banking ETF KRE Dec. 14
Emerson Electric Co. EMR Dec. 8
Fortinet, Inc. FTNT Dec. 7
Kulicke and Soffa Industries, Inc. KLIC Dec. 7
Dillard’s, Inc. DDS Dec. 4
Sonos, Inc. SONO Dec. 1
American Airlines Group, Inc. AAL Nov. 30
Bank of America Corp. BAC Nov. 20
SPDR S&P Oil & Gas Exploration and Production ETF XOP Nov. 20
MetLife, Inc. MET Nov. 19
Kohl’s Corp. KSS Nov. 18
Applied Materials, Inc. AMAT Nov. 17
Regions Financial Corp. RF Nov. 13
Norfolk Southern Corp. NSC Nov. 9
Communications Services Select Sector SPDR XLC Nov. 5
Alphabet, Inc. GOOGL Nov. 5
Micron Technology, Inc. MU Oct. 20
ON Semiconductor Corp. ON Oct. 16
Ford Motor Co. F Oct. 15
SPDR S&P Homebuilders ETF XHB Oct. 9
Shake Shack, Inc. SHAK Oct. 9
Martin Marietta Materials, Inc. MLM Sept. 30
Abercrombie & Fitch Co. ANF Sept. 29
Crocs, Inc. CROX Sept. 14
Five Below, Inc. FIVE Sept. 10
Deere & Co. DE Aug. 24
Johnson Controls International JCI Aug. 21
General Motors Co. GM Aug. 20
Builders FirstSource, Inc. BLDR Aug. 18
Industrial Select Sector SPDR XLI Aug. 6
SPDR S&P Metals & Mining ETF XME July 28
Materials Select Sector SPDR XLB July 20
Caterpillar, Inc. CAT July 20
SPDR S&P Retail ETF XRT June 3
iShares MSCI Japan ETF EWJ May 29
Tesla, Inc. TSLA Apr. 23
Apple, Inc. AAPL Mar. 27, 2020
Microsoft Corp. MSFT Feb. 22, 2019
* Click each symbol for current chart.