UPDATE: S&P 500 reaches firmer technical ground, pulls in from major resistance

01/22/19 01:17 PM EST

By Michael Ashbaugh, MarketWatch

Focus: Transports, financials and technology sector make technical progress; Charting Amazon's recovery attempt, IYT XLF, QQQ, AMZN, AMD, LEN

Technically speaking, the U.S. benchmarks' January rally attempt is intact, Tuesday's early downturn notwithstanding.

Still, the S&P 500 has tagged major resistance -- the 2017 close (2,673) -- an area that has drawn selling pressure to start this week. The downturn's aggressiveness, or lack thereof, will likely add color.

Before detailing the U.S. markets' wider view, the S&P 500's hourly chart highlights the past two weeks.

As illustrated, the index has extended its rally attempt, notching consecutive closes atop the November low (2,631). This area pivots to notable support.

Conversely, the S&P's next significant resistance matches the 2017 close (2,673). Last week's close (2,670) registered nominally lower, and this area has initially drawn selling pressure.

Similarly, the Dow Jones Industrial Average has extended its rally attempt.

Here again, last week's close (24,706) registered slightly under next resistance matching the 2017 close (24,719).

Tactically, the 24,500 area marks an inflection point, and is followed by deeper support matching the November closing low (24,286).

Against this backdrop, the Nasdaq Composite is also acting well technically.

Recall that the index has reclaimed the 2017 peak (7,004), and subsequently observed this area as support.

Additional overhead broadly spans from about 7,185 to 7,205 and is followed by the firmer 7,274 mark, illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has placed distance atop the 50-day moving average, currently 6,974, and the 2017 peak (7,004).

The prevailing breakout -- combined with still conspicuously absent January selling pressure -- raises the flag to an intermediate-term trend shift. A swift reversal under the 7,000 area would raise a caution flag.

Looking elsewhere, the Dow Jones Industrial Average has also extended its rally attempt.

Recall that its tight range just under the 24,000 mark positioned the Dow for the prevailing breakout.

The index has subsequently knifed to familiar resistance matching the 2017 close (24,719). Last week's close (24,706) registered nominally lower.

On further strength, the 2017 peak (24,876) and the 200-day moving average, currently 24,969, remain within striking distance.

Meanwhile, the S&P 500 has notched consecutive closes atop the 50-day moving average, currently 2,623, for the first time since October.

The index has also reclaimed more important overhead matching the breakdown point (2,631).

To reiterate, the S&P's next notable inflection point rests at the 2017 close (2,673), an area matching last week's close (2,670).

The bigger picture

Collectively, the U.S. benchmarks' bigger-picture backdrop continues to strengthen.

On a headline basis, each index has reclaimed its 50-day moving average, as well as significant technical resistance. See the Nasdaq 7,000 area, the Dow 24,000 resistance, as well as S&P 2,631.

If a strong downtrend were in play, these areas would be expected to draw selling pressure.

Moving to the small-caps, the iShares Russell 2000 ETF has notched consecutive closes atop the 50-day moving average, currently 143.70, for the first time since September.

The small-cap benchmark has also reclaimed its breakdown point -- the 145.60-to-146.00 area -- amid a volume uptick.

Similarly, the SPDR S&P MidCap 400 has rallied atop major resistance.

Here again, the specific area matches the 50-day moving average, currently 322.50, and the breakdown point (325.28).

Combined, the small- and mid-cap benchmarks have signaled intermediate-term trend shifts. Still, a swift reversal under the 50-day moving average would raise a caution flag.

Looking elsewhere, the SPDR Trust S&P 500 (SPY) has also reclaimed major resistance, circa 263.25.

Separately, the SPY has registered consecutive closes atop the 50-day moving average, currently 262.15. Constructive price action.

Returning to the three-year view, the SPY has placed distance atop its former breakdown point -- the 258.50-to-259.85 area.

The swift follow-through atop major resistance suggests that bearish momentum has faded.

Placing a finer point on the S&P 500, its backdrop supports a bullish intermediate-term bias.

The index has reclaimed two headline inflection points -- S&P 2,581 and 2,631 -- amid still conspicuously absent January selling pressure. In the process, the S&P has reached firmer technical ground atop the 50-day moving average, currently 2,623.

Moreover, the prevailing upturn remains firmly-grounded, originating from two 20-to-1 up days across a seven-session window, detailed previously. (An "up day" means that advancing volume surpassed declining volume by the stated margin.)

Tactically, former resistance pivots to support. The S&P's intermediate-term bias remains bullish barring a violation, though a swift reversal under support would raise a caution flag.

More broadly, the S&P 500's longer-term bias remains bearish pending a close atop major resistance (2,742) closely matching the 200-day moving average, currently 2,741.

See also: Charting a bull flag: S&P 500, Nasdaq maintain major support (http://www.marketwatch.com/story/charting-a-bull-flag-sp-500-nasdaq-maintain-major-support-2019-01-15-12103185).

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. (http://www.marketwatch.com/premium-newsletters/archive/technical-indicator) (http://www.marketwatch.com/premium-newsletters/archive/technical-indicator) (http://www.marketwatch.com/premium-newsletters/archive/technical-indicator)

Charting the U.S. sub-sector backdrop: Traditional sector leaders come to life

Drilling down further, the traditional sector leaders are making technical progress. Quickly consider the transports, technology sector and the financials:

To start, the iShares Transportation Average ETF has rallied atop its first significant resistance.

The specific area matches its breakdown point, circa 183.50, as well as trendline resistance closely tracking the 50-day moving average.

The breakout was fueled by increased volume, and raises the flag to an intermediate-term trend shift. As an economically-sensitive sector, the group's resurgence strengthens the bull case.

Meanwhile, the Invesco QQQ Trust (QQQ) tracks the Nasdaq 100 Index and serves as a large-cap technology sector proxy.

As illustrated, the shares have rallied atop trendline resistance pinned to the October peak amid increased volume.

Underlying the upturn, the relative strength index (not illustrated) has registered three-month highs, improving the chances of follow-through.

Tactically, the 50-day moving average has defined the trend, currently 161.50, and the rally attempt is intact barring a violation.

Looking elsewhere, the Financial Select Sector SPDR (XLF) has also come to life.

Technically, the group has reclaimed its breakdown point (25.24) an area matching the 50-day moving average, currently 25.22.

The breakout places the former range bottom (26.00) under siege, though amid comparably lackluster volume.

Tactically, the former breakdown point pivots to support (25.24) and the group's recovery attempt is intact barring a violation.

Moving to specific names, Amazon.com's (AMZN) recovery attempt remains underway.

Earlier this month, the shares rallied atop trendline resistance and the 50-day moving average, rising amid strong volume. The subsequent tight range has been underpinned by trendline support, positioning the shares to build on the early-month breakout.

Tactically, the 50-day moving average (1,601) has effectively defined the trend since April, and the rally attempt is intact barring a violation. (Across this span, Amazon has notched just one close counter to the 50-day's prevailing trend, the Dec. 3 close.)

Conversely, a retest of the 200-day moving average, currently 1,710.40, remains in play. On further strength, major resistance spans from about 1,755 to 1,772.

Advanced Micro Devices, Inc. (AMD) is a large-cap semiconductor name coming to life.

The shares started January with a breakout, clearing trendline resistance as well as the 50- and 200-day moving averages.

By comparison, the ensuing pullback has been flat, fueled by decreased volume, positioning the shares to build on the initial breakout. Tactically, the 200-day moving average has marked an inflection point, currently 19.13, and a posture higher supports a bullish bias.

Finally, Lennar Corp. (LEN) is a well positioned large-cap homebuilder.

Technically, the shares have recently staged a strong-volume breakout, rising after the company's fourth-quarter results and revised outlook.

The subsequent tight range signals muted selling pressure, positioning the shares to extend the uptrend. Tactically, the 100-day moving average, currently 44.45, is followed by the deeper breakout point (43.90).

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. (http://www.marketwatch.com/premium-newsletters/archive/technical-indicator)

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01-22-19 1317ET

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