Technically speaking, U.S. stocks are starting September against a bullish longer-term backdrop.
Consider that the S&P 500 and Nasdaq Composite have recently staged statistically unusual technical breakouts — rallies to uncharted territory — and the subsequent pullback, still underway, continues to register as comparably flat.
Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.43% hourly chart highlights the past two weeks.
As illustrated, the S&P is digesting a decisive late-August break to record territory.
Tactically, a near-term floor matches the top of the gap (2,884) and is followed by firmer support at the breakout point (2,873).
Meanwhile, the Dow Jones Industrial Average has pulled in from six-month highs.
Recall that a near-term floor matches the breakout point (25,888) a level the Dow maintained to conclude August.
Delving deeper, a more distant floor matches the July peak (25,587).
Against this backdrop, the Nasdaq Composite COMP, -0.59% remains the strongest big three benchmark.
The index has established a tight three-session range, signaling that the selling pressure near record highs remains muted. It continues to digest a powerful August breakout, better illustrated below.
Widening the view to six months, the Nasdaq’s daily chart includes the 20-day Bollinger bands, also known as volatility bands. Illustrated in red, the bands encompass two standard deviations of the Nasdaq’s trailing 20-day volatility.
Recall that consecutive closes atop the bands are statistically unusual, and signal a tension between two time horizons.
For the near-term, the index is overbought and due to consolidate. The breakout has placed the index up on a stilt, outside the trailing two standard deviation band.
But more importantly, the underlying bullish momentum has registered as extreme, likely laying the groundwork for longer-term upside follow-through. The Nasdaq registered four consecutive closes atop the bands last week, a stretch that was snapped Friday.
Looking elsewhere, the Dow Jones Industrial Average has broken out less decisively.
The blue-chip benchmark registered just one close atop its volatility bands (not illustrated) last week.
Still, the index is acting well technically, maintaining a posture atop support (25,888) closely matching the top of the August gap. Recall that an overhead target projects to the 26,420 area.
Like the Nasdaq, the S&P 500 has staged a two standard deviation breakout.
In its case, the S&P registered three consecutive closes atop the 20-day volatility bands, a stretch that was snapped Thursday.
The bigger picture
All told, the major U.S. benchmarks are acting well technically.
On a headline basis, the Nasdaq Composite and S&P 500 have recently registered runaway gaps — detailed last week — moves punctuated by at least three straight closes atop the 20-day Bollinger bands.
Meanwhile, the Dow Jones Industrial Average has rallied less decisively to six-month highs, though its prevailing pullback remains flat, and has been underpinned by first support.
Moving to the small-caps, the iShares Russell 2000 ETF has extended a modest break to record territory.
The breakout resolves a double bottom — defined by the June and July lows — and a near-term target projects to the 175.50 area. Separately, the small-cap benchmark continues to hold tightly to its trendline.
Meanwhile, the SPDR S&P MidCap 400 has rallied more aggressively to record highs.
Recall that well-defined support matches the breakout point (366.70), while a near-term target projects to the 375 area.
Against this backdrop, the SPDR Trust S&P 500 SPY, -0.41% is also digesting a recent break to record territory.
Recall that the prevailing leg higher originates from a mid-August retest of the breakout point.
Summing up the backdrop
Collectively, the U.S. benchmarks are starting September against a bullish longer-term backdrop. Consider the following:
The S&P 500 and Nasdaq Composite have staged decisive breakouts, concurrently notching at least three straight closes atop the 20-day volatility bands. Both breakouts will likely register as runaways gaps — spikes to uncharted territory — detailed last week. The U.S. sub-sector backdrop remains rotational, and participation continues to broaden.
Placing a finer point on the S&P 500, its breakout originates from a successful test of major support (2,802). The mid-August low (2,802.5) registered within a fraction.
On further strength, its next target projects to the 2,924 area, detailed previously. If reached, the rally would register as a 1.8% breakout atop the January peak.
Conversely, familiar support matches the breakout point (2,873) and is followed by the more distant, but ascending, 50-day moving average, currently 2,817.
All told, a consolidation phase remains underway to start September, though the S&P 500’s intermediate-term bias remains bullish barring a violation of these areas.
See also: Charting the break to ‘clear skies’ territory: S&P 500, Nasdaq tag record highs.
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, -0.14% has come to life technically. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.
As illustrated, the shares have absorbed the mid-August strong-volume downdraft, reversing respectably from two-month lows.
In the process, the shares have cleared trendline resistance, rising to challenge the former range top (14.74). Follow-through opens the path to a less-charted patch, an area capped by the USO’s 34-month high at the July peak (15.25).
More broadly, the USO’s longer-term backdrop remains firmly bullish. The shares are rising from a continuation pattern underpinned by the 200-week moving average, illustrated on the three-year chart. (The mid-August low registered two cents above the trending indicator.)
Moving to U.S. sectors, the iShares U.S. Real Estate ETF is acting well technically. (Yield = 3.7%.)
As illustrated, the group has recently tagged 23-month highs, clearing resistance matching the July peak. The subsequent flag pattern has been underpinned by the breakout point, positioning the group to extend the uptrend.
Tactically, trendline support closely tracks the 50-day moving average, currently 81.40, and the group’s uptrend is intact barring a violation.
Also notice the July golden cross — or bullish 50-day/200-day moving average crossover — signaling that the intermediate-term uptrend has overtaken the longer-term trend.
Initially profiled Aug. 5, 2016, Microsoft Corp. MSFT, -0.98% has returned 93.8% and remains well positioned.
Technically, the shares staged a modest late-August breakout, edging to record territory. A near-term target projects from the mid-month low to the 114 area.
Conversely, the breakout point pivots to support (110.20) and is followed by the trendline, closely tracking 50-day moving average, currently 106.00. Microsoft’s intermediate-term uptrend is intact barring a violation.
Williams-Sonoma, Inc. WSM, +1.62% is a well positioned large-cap retailer.
Late last month, the shares gapped sharply higher, rising after the company’s strong second-quarter results.
The ensuing pullback has been comparably flat, placing the shares at an attractive entry 5.4% under the August peak. Tactically, the top of the gap (67.75) has underpinned the pullback, and a sustained posture higher positions the shares to build on the initial spike.
Express, Inc. EXPR, +1.38% is a small-cap retailer coming to life.
Technically, the shares have knifed to eight-month highs, rising amid a delayed reaction to the company’s quarterly results released Wednesday.
The rally punctuates a successful test of trendine support, and opens the path to less-charted territory, illustrated on the three-year chart. Though near-term extended, and due to consolidate, a pullback toward the breakout point (10.75) would offer an attractive entry.
Finally, Vertex Pharmaceuticals, Inc. VRTX, -0.89% is a well positioned large-cap biotech name.
As illustrated, the shares have reached all-time highs, rising from a modified cup-and-handle defined by the June and August lows. A near-term target projects to the 195 area.
More broadly, the shares are also well positioned on the three-year chart, rising from a continuation pattern pinned to the steep July rally. Tactically, a near-term floor (182.60) is followed by the former range top (178.25) and a posture higher supports 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.
Company Symbol Date Profiled Nordstrom, Inc. JWN Aug. 31 Brooks Automation, Inc. BRKS Aug. 31 iShares Biotechnology ETF IBB Aug. 30 Amgen, Inc. AMGN Aug. 30 Intuit, Inc. INTU Aug. 30 Whiting Petroleum Corp. WLL Aug. 30 VanEck Vectors Semiconductor ETF SMH Aug. 29 Nike, Inc. NKE Aug. 29 Keysight Technologies, Inc. KEYS Aug. 29 Southwest Airlines Co. LUV Aug. 29 Deere & Co. DE Aug. 27 Marathon Petroleum Corp. MPC Aug. 27 Neurocrine Biosciences, Inc. NBIX Aug. 27 Lululemon Athletica, Inc. LULU Aug. 27 Delta Air Lines, Inc. DAL Aug. 24 Hortonworks, Inc. HDP Aug. 24 Ligand Pharmaceuticals, Inc. LGND Aug. 24 RingCentral, Inc. RNG Aug. 23 Take-Two Interactive Software, Inc. TTWO Aug. 23 Splunk, Inc. SPLK Aug. 23 Global Blood Therapeutics, Inc. GBT Aug. 23 Cisco Systems, Inc. CSCO Aug. 22 F5 Networks, Inc. FFIV Aug. 22 Boston Scientific Corp. BSX Aug. 22 Industrial Select Sector SPDR XLI Aug. 22 Universal Display Corp. OLED Aug. 21 SailPoint Technologies Holdings, Inc. SAIL Aug. 21 Alaska Air Group, Inc. ALK Aug. 21 Kimberly-Clark Corp. KMB Aug. 15 T-Mobile US, Inc. TMUS Aug. 14 Five9, Inc. FIVN Aug. 14 Emerson Electric Co. EMR Aug. 14 Acacia Communications, Inc. ACIA Aug. 13 Zebra Technologies Corp. ZBRA Aug. 13 Unit Corp. UNT Aug. 13 Avnet, Inc. AVT Aug. 10 Clorox Co. CLX Aug. 10 Bristol-Myers Squibb Co. BMY Aug. 9 United Technologies Corp. UTX Aug. 9 Itron, Inc. ITRI Aug. 9 Teladoc, Inc. TDOC Aug. 9 Paycom Software, Inc. PAYC Aug. 8 Zendesk, Inc. ZEN Aug. 8 Eaton Corp. ETN Aug. 8 Kansas City Southern KSU Aug. 8 iShares Transportation Average ETF IYT Aug. 7 Xilinx, Inc. XLNX Aug. 7 Integrated Device Technology, Inc. IDTI Aug. 7 Myriad Genetics, Inc. MYGN Aug. 7 Health Care Select Sector SPDR XLV Aug. 6 American Tower Corp. AMT Aug. 6 Cognex Corp. CGNX Aug. 6 Phillips 66 PSX Aug. 6 KLA-Tencor Corp. KLAC Aug. 3 Global Payments, Inc. GPN Aug. 3 SM Energy Co. SM Aug. 3 Venom Energy Partners VNOM Aug. 2 Flir Systems, Inc. FLIR Aug. 2 Yext, Inc. YEXT Aug. 1 SunTrust Banks, Inc. STI July 30 Andeavor ANDV July 30 Lattice Semiconductor Corp. LSCC July 30 Amgen, Inc. AMGN July 27 Mosaic Co. MOS July 27 Valero Energy Corp. VLO July 26 Pfizer, Inc. PFE July 25 Northern Trust Corp. NTRS July 24 SS&C Technologies Holdings, Inc. SSNC July 23 Arconic, Inc. ARNC July 23 Taiwan Semiconductor Manufacturing Co. TSM July 20 Bank of America Corp. BAC July 20 JPMorgan Chase and Co. JPM July 19 Cummins, Inc. CMI July 19 Citrix Systems, Inc. CTXS July 18 Corning, Inc. GLW July 18 Kulicke and Soffa Industries, Inc. KLIC July 18 Five Below, Inc. FIVE July 17 Sony Corp. SNE July 16 Celgene Corp. CELG July 16 Walmart, Inc. WMT July 16 National Oilwell Varco, Inc. NOV July 13 Visa, inc. V July 12 Walt Disney Co. DIS July 12 Paychex, Inc. PAYX July 11 RH RH July 11 Seattle Genetics, Inc. SGEN July 9 Johnson & Johnson JNJ July 5 Kroger Co. KR July 5 Silicon Motion Technology Corp. SIMO July 3 CyrusOne, Inc. CONE July 3 FleetCor Technologies, Inc. FLT July 2 Tandem Diabetes Care, Inc. TNDM July 2 Oceaneering International, Inc. OII June 29 NII Holdings, Inc. NIHD June 29 BioMarin Pharmaceutical, Inc. BMRN June 27 Church & Dwight Co., Inc. CHD June 27 CF Industries Holdings, Inc. CF June 25 Procter & Gamble Co. PG June 22 Semtech Corp. SMTC June 22 Merck & Co., Inc. MRK June 21 Alphabet, Inc. GOOGL June 15 Allergan AGN June 15 Pepsico, Inc. PEP June 14 Mosaic Co. MOS June 13 Consumer Staples Select Sector SPDR XLP June 13 Roku, Inc. ROKU June 12 Viking Therapeutics, Inc. VKTX June 12 Medicines Co. MDCO June 11 Health Care Select Sector SPDR XLV June 8 Monster Beverage Corp. MNST June 7 VMWare, Inc. VMW June 6 SPDR S&P Biotech ETF XBI June 5 Kohl’s Corp. KSS June 5 Union Pacific Corp. UNP May 21 Twilio, Inc. TWLO May 21 SPDR S&P Retail ETF XRT May 15 Lowe’s Companies, Inc. LOW May 14 PowerShares QQQ Trust QQQ May 10 Coupa Software, Inc. COUP May 8 Apple, Inc. AAPL May 7 Norfolk Southern Corp. NSC May 2 Advanced Micro Devices, Inc. AMD May 1 UnitedHealth Group, Inc. UNH Apr. 30 Nike, Inc. NKE Apr. 30 Costco Wholesale Corp. COST Apr. 26 CSX Corp. CSX Apr. 26 NetApp, Inc. NTAP Apr. 9 Domino’s Pizza, Inc. DPZ Mar. 21 Burlington Stores, Inc. BURL Mar. 14 TJX Companies, Inc. TJX Mar. 6 Chart Industries, Inc. GTLS Mar. 6 LivePerson, Inc. LPSN Feb. 28 VeriSign, Inc. VRSN Feb. 26 ServiceNow, Inc. NOW Feb. 21 Adobe Systems, Inc. ADBE Feb. 16 Salesforce.com, Inc. CRM Feb. 12 Fortinet, Inc. FTNT Jan 19 Sarepta Therapeutics, Inc. SRPT Jan. 3 MSCI, Inc. MSCI Nov. 20 Motorola Solutions, Inc. MSI Nov. 14 Lululemon Athletica, Inc. LULU Oct. 24 HubSpot, Inc. HUBS Oct. 4 Nvidia Corp. NVDA Sept. 27 Bottomline Technologies, Inc. EPAY July 13 GrubHub, Inc. GRUB May 4 Square, Inc. SQ Mar. 3 Microsoft Corp. MSFT Aug. 5
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