The Technical Indicator: Bull trend absorbs oil shock, S&P 500 maintains first support


Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.

Technically speaking, the U.S. benchmarks’ September price action remains comfortably bullish.

Though each big three benchmark has recently topped slightly under record territory, the prevailing pullback from the September peak has registered as orderly, inflicting limited, if any, true technical damage.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.07%  hourly chart highlights the past two weeks.

As illustrated, the S&P is acting well technically. The prevailing pullback has thus far been underpinned by first support matching the breakout point (2,989).

Delving deeper, the top of the gap (2,960) is followed by the 50-day moving average, currently 2,950.

Meanwhile, the Dow Jones Industrial Average DJIA, -0.20%  remains the strongest big three U.S. benchmark.

Tactically, an inflection point matches the July gap (27,088) — an area also detailed on the daily chart — and is followed by the former range top (26,900).

Against this backdrop, the Nasdaq Composite COMP, -0.01%  is also acting well technically.

Here again, the prevailing pullback from the September peak has been underpinned by the breakout point (8,134).

Separately, recall that last week’s close (8,176) matched the April peak (8,176), a headline inflection point also illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq is digesting the early-September breakout.

Tactically, the 50-day moving average, currently 8,060, closely matches the July gap (8,059) and the top of the September gap (8,061). A posture atop this area signals a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has snapped an eight-session winning streak, its longest stretch in over one year.

The September peak registered about 92 points under its all-time high.

Tactically, an inflection point matches the July gap (27,088) and is followed by support (26,900) better illustrated on the hourly chart.

Meanwhile, the S&P 500 has thus far topped about seven points under its record peak (3,028).

Broadly speaking, the 50-day moving average, currently 2,950.6, is closely followed by the former range top (2,943). A posture atop this area signals a bullish intermediate-term bias.

The bigger picture

Collectively, the major U.S. benchmarks’ bigger-picture backdrop remains bullish.

Though each index has topped slightly under record territory, the prevailing pullback from the September peak has been orderly — at least so far.

Moving to the small-caps, the iShares Russell 2000 ETF has knifed atop the 50-day moving average, rising to next resistance (158.00).

The initial breakout was fueled by a volume spike, while recent selling pressure near resistance has been driven by decreased volume. Constructive price action.

The small-cap benchmark has not closed atop the 158 mark since early May.

Similarly, the SPDR S&P MidCap 400’s backdrop strengthened with last week’s spike atop the 50-day moving average.

Tactically, the MDY’s 11-month range top spans from about 362.00 to 362.90, and the pending retest will likely add color. An eventual breakout would resolve a double bottom defined by the May and August lows.

Looking elsewhere, the SPDR Trust S&P 500 remains incrementally stronger than the small- and mid-caps.

The SPY briefly tagged a fractional record high (302.46) last week, though it has yet to surpass its record close (302.01), established July 26.

Placing a finer point on the S&P 500, its September price action remains bullish.

To start, the prevailing pullback from the September peak has been flat, underpinned by first support (2,989).

Also recall that last week’s low (2,957) closely matched the top of the gap (2,960) punctuating a successful test of what was then first support.

Delving deeper, a more important floor matches the breakout point (2,943). The S&P’s intermediate-term bias remains bullish barring a violation.

Conversely, the September peak (3,020.74) has registered slightly under the S&P’s record close (3,025.86) and absolute record peak (3,027.98).

Against this backdrop, the prevailing pullback from the September peak has thus far registered as flat, fueled by decreased volume, and has been underpinned by well-defined support.

Beyond technical levels, the September backdrop has been punctuated by healthy U.S. sector rotation, as well as tandem global-market breakouts, most recently detailed last week. Collectively, the S&P 500’s intermediate- to longer-term technical bias remains bullish.

Also see: Charting a bullish technical tilt, S&P 500 sustains September breakout.

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 United States Oil Fund USO, -2.77%  — profiled last week — has confirmed a September trend shift. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

As illustrated, the shares gapped sharply higher in Monday’s action, notching a 12.2% single-day gain after a weekend attack on Saudi Arabia’s largest oil facilities erased about one half of the country’s daily production. (Also about 5% of global daily production.)

The shares are lower early Tuesday, pressured amid reports that production may be restored within just two to three weeks.

Nonetheless, the strong-volume spike places the shares at nearly four-month highs, and resolves a bullish island reversal defined by the May and September gaps. Gap support spans from 12.37 to 12.45.

Delving deeper, trendline support closely matches the major moving averages — the 11.70 area — and a late-year rally attempt is intact barring a violation.

Moving to U.S. sectors, the SPDR S&P Oil and Gas Exploration and Production ETF — profiled Friday — has also taken flight.

In the process, the group has gapped atop its breakdown point (24.65), confirming the early-September trend shift. The prevailing upturn originates from trendline support closely tracking the 50-day moving average.

Looking elsewhere, the 10-year Treasury note yield TNX, -1.85%  has turned higher, rising amid a September risk-on trade.

In the process, the yield has registered consecutive closes atop the 50-day moving average, a level that formerly defined the downtrend. The breakout raises the flag to a potential intermediate-term trend shift to the extent the upturn is sustained.

On further strength, major overhead matches the 2017 low (2.03) and the July close (2.02) established immediately before the August downdraft.

Conversely, gap support (1.79) matches the 50-day moving average, also currently 1.79. The pending retest from above will likely add color.

Moving to specific names, Hess Corp. HES, -2.92%   is a large-cap oil and gas name coming to life. (Yield = 1.4%.)

Technically, the shares have gapped atop trendline resistance, knifing to 11-month highs.

Though near-term extended, the strong-volume spike is longer-term bullish and the shares are attractive on a pullback. Tactically, the top of the gap (66.28) is followed by the deeper breakout point (64.80).

Westlake Chemical Corp. WLK, -4.21%  is a large-cap specialty chemicals producer. (Yield = 1.5%.)

As illustrated, the shares have extended a trendline breakout, rising to close atop the 200-day moving average for the first time since August 2018. The upturn signals a potential primary trend shift.

Tactically, trendline support closely matches the 50-day moving average, currently 63.90, and the recovery attempt is intact barring a violation.

Initially profiled June 26, SunPower Corp. SPWR, +13.89%  has returned 27.4% and remains well positioned.

The shares started August with a breakout, gapping to three-year highs after the company’s second-quarter results.

The ensuing pullback has filled the gap, also placing the shares at an attractive entry near the breakout point (12.50) and 24% under the August peak.

Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.

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
JPMorgan Chase & Co. JPM Sept. 16
Guidewire Software, Inc. GWRE Sept. 16
Energy Select Sector SPDR XLE Sept. 16
SPDR Oil and Gas Exploration & Production ETF XOP Sept. 13
National Oilwell Varco, Inc. NOV Sept. 13
iShares Japan ETF EWJ Sept. 13
Alibaba Group Holding Limited BABA Sept. 13
Industrial Select Sector SPDR XLI Sept. 12
Boeing Co. BA Sept. 12
Nevro Corp. NVRO Sept. 12
VanEck Vectors Semiconductor ETF SMH Sept. 11
Five Below, Inc. FIVE Sept. 11
Sina Corp. SINA Sept. 11
G1 Therapeutics, Inc. GTHX Sept. 11
FedEx Corp. FDX Sept. 10
Kansas City Southern KSU Sept. 10
Zumiez, Inc. ZUMZ Sept. 9
Amedisys, Inc. AMED Sept. 9
Integra LifeSciences Holdings Corp. IART Sept. 9
Ceridian HCM Holding, Inc. CDAY Sept. 9
Travelers Companies, Inc. TRV Sept. 6
Bitauto Holdings Ltd. BITA Sept. 6
Weibo Corp. WB Sept. 5
CVS Corp. CVS Sept. 5
Seagate Technology STX Sept. 4
Universal Health Services, Inc. UHS Sept. 4
Estee Lauder Co., Inc. EL Sept. 4
Lam Research Corp. LRCX Sept. 3
Lowe’s Companies, Inc. LOW Aug. 29
M.D.C. Holdings, Inc. MDC Aug. 29
PepsiCo, Inc. PEP Aug. 28
Urban Outfitters, Inc. URBN Aug. 28
iShares U.S. Home Construction ETF ITB Aug. 27
CyrusOne, Inc. CONE Aug. 27
Western Digital Corp. WDC Aug. 23
MobileIron, Inc. MOBL Aug. 23
VanEck Vectors Retail ETF RTH Aug. 22
Carvana Co. CVNA Aug. 22
Apple, Inc. AAPL Aug. 21
SPDR S&P Homebuilders ETF XHB Aug. 21
Reliance Steel & Aluminum Co. RS Aug. 21
AMAG Pharmaceuticals, Inc. AMAG Aug. 21
KLA Corp. KLAC Aug. 20
XPO Logistics, Inc. XPO Aug. 20
Itron, Inc. ITRI Aug. 19
Sonos, Inc. SONO Aug. 19
Cirrus Logic CRUS Aug. 16
Builders FirstSource, Inc. BLDR Aug. 16
Lattice Semiconductor Corp. LSCC Aug. 13
Kellogg Co. K Aug. 13
Zimmer Biomet Holdings, Inc. ZBH Aug. 12
L3Harris Technologies, Inc. LHX Aug. 12
Akamai Technologies, Inc. AKAM Aug. 8
D.R. Horton, Inc. DHI July 31
Teradyne, Inc. TER July 30
United Parcel Service, Inc. UPS July 29
Abbott Laboratories ABT July 26
Agnico Eagle Mines Ltd. AEM July 18
Franco-Nevada Corp. FNV July 18
Pan American Silver Corp. PAAS July 17
Neurocrine Biosciences, Inc. NBIX July 17
Texas Instruments, Inc. TXN July 15
J.B. Hunt Transport Services, Inc. JBHT July 15
Owens Corning OC July 11
Twitter, Inc. TWTR July 10
Micron Technology, Inc. MU July 10
Inphi Corp. IPHI July 8
Shake Shack, Inc. SHAK June 28
FMC Corp. FMC June 27
SunPower Corp. SPWR June 26
VanEck Vectors Gold Miners ETF GDX June 21
iShares Silver Trust SLV June 20
Home Depot, Inc. HD June 19
Lululemon Athletica, Inc. LULU June 19
SPDR Gold Shares ETF GLD June 18
Synopsys, Inc. SNPS June 17
Verisk Analytics, Inc. VRSK June 17
Medtronic plc MDT June 14
Ross Stores, Inc. ROST June 14
Kirkland Lake Gold Ltd. KL June 13
Coca-Cola Co. KO June 6
Dollar General Corp. DG June 5
SolarEdge Technologies, Inc. SEDG May 16
Roku, Inc. ROKU May 15
Johnson Controls International JCI May 10
Take-Two Interactive Software, Inc. TTWO May 2
Jacobs Engineering Group, Inc. JEC May 2
Consumer Staples Select Sector SPDR XLP Mar. 28
Shopify, Inc. SHOP Mar. 27
iShares U.S. Real Estate ETF IYR Mar. 13
Costco Wholesale Corp. COST Mar. 6
Vulcan Materials Co. VMC Mar. 1
Walmart, Inc. WMT Feb. 22
Microsoft Corp. MSFT Feb. 22
Procter & Gamble Co. PG Feb. 8
Applied Materials, Inc. AMAT Jan. 25
Advanced Micro Devices, Inc. AMD Jan. 22
Coupa Software, Inc. COUP Jan. 16
American Tower Corp. AMT Nov. 5
Utilities Select Sector SPDR XLU Oct. 25
McDonald’s Corp. MCD Oct. 24
Yum! Brands, Inc. YUM Oct. 18

Read on Marketwatch