Technically speaking, the major U.S. benchmarks have pulled in from record highs, thus far modestly, digesting the massive late-2016 breakout.
Still, while a near-term consolidation phase has been long overdue, and remains underway, the U.S. benchmarks’ more important longer-term backdrop continues to support a firmly-bullish bias.
Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.37% hourly chart highlights the past two weeks.
As illustrated, the S&P staged a modest late-year pullback, closing 2016 at 2,238.8.
From current levels, initial resistance holds around 2,252, and is followed by an inflection point at 2,263, matching Tuesday’s early high.
Meanwhile, the Dow industrials’ backdrop remains slightly stronger.
In its case, the blue-chip benchmark has effectively maintained its three-week range, underpinned by support around 19,750. The Dow closed last year at 19,762.6.
Separately, consider that the 2016 peak missed the 20,000 mark by just 13 points.
Similarly, the Nasdaq Composite has pulled in respectably from record territory, closing 2016 at 5,383.1. A posture above this level signals a year-to-date gain, and vice versa.
Technically, the November peak matches a near-term inflection point, better illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has pulled in from a record high slightly above the 5,500 mark.
To reiterate, the 5,400 area defines an immediate inflection point, and is followed by firmer support at 5,340, closely matching the September and October peaks.
Moving to the Dow, the blue-chip benchmark has pulled in less aggressively.
Recall that near-term support holds around 19,750, closely matching the 20-day moving average, currently 19,770. The Dow has not closed under the 20-day since Nov. 4.
On further weakness, near-term support remains poorly-defined. Potential floors rest at 19,665 and 19,550, though the Dow’s first true support holds around 19,275.
Conversely, the headline 20,000 mark closely matches the 2016 peak, and remains a technical hurdle.
Meanwhile, the S&P 500 concluded 2016 with its first close under the 20-day moving average since Nov. 4.
Based on today’s backdrop, the 20-day moving average, currently 2,249, matches a near-term inflection point, illustrated on the hourly chart. On further weakness, the 2,214 breakout point marks notable support.
The bigger picture
Broadly speaking, the U.S. benchmarks have asserted a holding pattern, digesting the steep late-2016 rally.
Against this backdrop, selling pressure remains flat, so far, and recent weakness has inflicted limited damage.
Moving to the small-caps, the iShares Russell 2000 ETF IWM, -0.09% is acting well technically.
Consider that the IWM closed 2016 at 134.85, just four cents above first support.
More broadly, the directionally steep November breakout, and comparably flat December range, signal that bullish momentum is intact. The small-cap benchmark’s intermediate-term path of least resistance points higher.
Similarly, the SPDR S&P MidCap 400 has established a bull flag, digesting the late-2016 spike.
In its case, first support spans from about 301.00 to 301.70, closely matching the late-December lows.
Meanwhile, the SPDR Trust S&P 500 SPY, +0.25% violated its 20-day moving average to conclude 2016 amid a seasonally uncharacteristic volume uptick.
As always, the 20-day is a widely-tracked near-term trending indicator. Firmer support spans from about 221.55 to 221.80.
Against this backdrop, the S&P 500 has concurrently notched its first close under the 20-day moving average since Nov. 4.
To reiterate, the S&P’s 20-day, currently 2,249, closely matches a near-term inflection point, and remains firmly in play early Tuesday. This area defines the immediate bull-bear technical tension.
Still, deeper, and more significant support, rests at the 2,214 breakout point, and the 2,190 mark, closing matching the December closing low.
Within this band, the S&P’s 50-day moving average currently holds at 2,197. Recall that the 50-day effectively capped the pre U.S. election price action. Against the current backdrop, it remains a useful bull-bear gauge.
Collectively, to the extent the 2,190-to-2,214 area holds — and it would be expected to hold on the first or second retest — the S&P 500’s intermediate- to longer-term backdrop supports a bullish bias.
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, persistent U.S. dollar strength remains in play.
Technically, the PowerShares U.S. Dollar Bullish ETF UUP, +0.83% has sustained a break to seven-year highs, staging its second consecutive successful test of first support. (Recall that the December low matched the top of the November gap.)
The orderly two-week range is a continuation pattern, and dovetails with a bullish multi-year backdrop, illustrated on the monthly chart. The dollar’s longer-term path of least resistance points firmly higher.
More broadly, the U.S. Dollar Index has reached its latest 14-year high early Tuesday, following stronger-than-expected manufacturing data. Conversely, the CurrencyShares Euro ETF remains under pressure, briefly tagging a record low early Tuesday.
Meanwhile, the United States Oil Fund USO, -2.77% continues to act well technically. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.
The shares initially spiked four weeks ago, rising to the range top after OPEC nations agreed to a production cut.
Consider that major resistance spans from 11.79 to 11.94 — matching the October and December peaks — and recent selling pressure near the range top has been muted.
To reiterate, a breakout would resolve a massive double bottom, opening the path to potentially material follow-through. A projected target matches the 2016 peak of 12.45, illustrated on the weekly chart.
Moving to specific names, Rowan Companies RDC, +2.38% is a well positioned mid-cap oil driller.
The shares initially spiked four weeks ago, clearing a well-defined range top matching the July peak.
The subsequent pullback has been fueled by decreased volume, placing the shares at an attractive entry near the breakout point, and 14.7% under the December peak. The shares are also well positioned on the weekly chart.
Initially profiled Aug. 2, Micron Technology, Inc. MU, +2.10% has returned 61.7% and remains well positioned.
Late last month, the shares gapped to 52-week highs, rising after the company’s strong first-quarter results.
The ensuing pullback has been comparably flat, placing the shares at an attractive entry near the bottom of the gap, and 7.7% under the December peak.
ASML Holding N.V. ASML, -1.75% is a large-cap chip equipment name based in the Netherlands.
Technically, the shares have recently gapped atop trendline resistance, rising to the range top after an analyst upgrade.
The subsequent selling pressure has been flat, punctuated by a nominal 52-week high. The late-year upturn was fueled by a volume uptick, positioning the shares for a potentially more decisive breakout.
Separately, ASML Holding is within striking distance of all-time highs — uncharted territory — better illustrated on the monthly chart.
Extra Space Storage, Inc. EXR, -0.87% is a large-cap REIT showing signs of life. (Yield = 4.0%.)
As illustrated, the shares have recently cleared trendline resistance that closely tracked the 50-day moving average. The tight December range is a continuation pattern, positioning the shares for potentially material follow-through.
Tactically, the 50-day has marked a useful trending indicator, currently 73.10, and a recovery attempt is intact barring a violation.
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 |
| National Oilwell Varco, Inc. | NOV | Dec. 22 |
| Exxon Mobil | XOM | Dec. 22 |
| Cirrus Logic, Inc. | CRUS | Dec. 22 |
| RPC, Inc. | RES | Dec. 21 |
| Northern Trust Corp. | NTRS | Dec. 21 |
| AK Steel Holding Corp. | AKS | Dec. 21 |
| Ionis Pharmaceuticals, Inc. | IONS | Dec. 21 |
| InterDigital, Inc. | IDCC | Dec. 20 |
| AutoDesk, Inc. | ADSK | Dec. 20 |
| Delta Air Lines, Inc. | DAL | Dec. 20 |
| Cavium, Inc. | CAVM | Dec. 20 |
| ON Semiconductor Corp. | ON | Dec. 19 |
| Flour Corp. | FLR | Dec. 19 |
| Dunkin’ Brands Group, Inc. | DNKN | Dec. 19 |
| Clorox Co. | CLX | Dec. 19 |
| F5 Networks, Inc. | FFIV | Dec. 16 |
| Align Technology, Inc. | ALGN | Dec. 16 |
| HollyFrontier Corp. | HFC | Dec. 16 |
| CyrusOne, Inc. | CONE | Dec. 16 |
| Broadcom Limited | AVGO | Dec. 14 |
| Ciena Corp. | CIEN | Dec. 14 |
| Take-Two Interactive Software, Inc. | TTWO | Dec. 14 |
| Emerson Electric Co. | EMR | Dec. 14 |
| The Travelers Companies, Inc. | TRV | Dec. 13 |
| Microsoft Corp. | MSFT | Dec. 12 |
| Continental Resources, Inc. | CLR | Dec. 12 |
| Apple, Inc. | AAPL | Dec. 9 |
| Xilinx, Inc. | XLNX | Dec. 9 |
| Matador Resources Co. | MTDR | Dec. 9 |
| State Street Corp. | STT | Dec. 9 |
| Southwest Airlines Co. | LUV | Dec. 9 |
| United Continental Holdings, Inc. | UAL | Dec. 7 |
| Nexstar Broadcasting Group, Inc. | NXST | Dec. 7 |
| Tenneco, Inc. | TEN | Dec. 7 |
| Schlumberger Limited | SLB | Dec. 6 |
| Dow Chemical Co. | DOW | Dec. 6 |
| Walt Disney Co. | DIS | Dec. 6 |
| Consumer Discretionary SPDR | XLY | Dec. 5 |
| Jetblue Airways Corp. | JBLU | Dec. 5 |
| International Paper Co. | IP | Dec. 5 |
| Lowe’s Companies, Inc. | LOW | Dec. 5 |
| Signet Jewelers Limited | SIG | Dec. 5 |
| Helmerich & Payne, Inc. | HP | Dec. 1 |
| Spirit Airlines, Inc. | SAVE | Dec. 1 |
| Fir Systems, Inc | FLIR | Dec. 1 |
| Advanced Micro Devices, Inc. | AMD | Nov. 30 |
| Ross Stores, Inc. | ROST | Nov. 30 |
| Arista Networks, Inc. | ANET | Nov. 29 |
| Western Digital Corp. | WDC | Nov. 29 |
| SPDR S&P Retail ETF | XRT | Nov. 28 |
| NetApp, Inc. | NTAP | Nov. 28 |
| Cummins, Inc. | CMI | Nov. 28 |
| UnitedHealth Group Inc. | UNH | Nov. 23 |
| United Technologies Corp. | UTX | Nov. 23 |
| Verizon Communications | VZ | Nov. 23 |
| General Motors Co. | GM | Nov. 23 |
| International Business Machines Corp. | IBM | Nov. 22 |
| Freeport McMoRan, Inc. | FCX | Nov. 22 |
| Incyte Corp. | INCY | Nov. 22 |
| Macom Technology Solutions | MTSI | Nov. 22 |
| Juniper Networks, Inc. | JNPR | Nov. 21 |
| Vulcan Materials Co. | VMC | Nov. 21 |
| Nucor Corp. | NUE | Nov. 21 |
| Rio Tinto | RIO | Nov. 18 |
| Applied Materials, Inc. | AMAT | Nov. 18 |
| VMware, Inc. | VMW | Nov. 18 |
| CF Industries Holdings, Inc. | CF | Nov. 17 |
| Akamai Technologies, Inc. | AKAM | Nov. 16 |
| Applied Micro Circuits Corp. | AMCC | Nov. 16 |
| United Parcel Service Inc. | UPS | Nov. 16 |
| Financial Select Sector SPDR | XLF | Nov. 8 |
| T-Mobile US, Inc. | TMUS | Nov. 8 |
| Teradyne, Inc. | TER | Nov. 8 |
| Amkor Technology, Inc. | AMKR | Nov. 8 |
| Swift Transportation Co. | SWFT | Nov. 7 |
| Lincoln Electric Holdings, Inc. | LECO | Nov. 7 |
| Valero Energy Corp. | VLO | Nov. 1 |
| American Express Co. | AXP | Nov. 1 |
| U.S. Bancorp | USB | Oct. 31 |
| Bank of New York Mellon Corp. | BK | Oct. 31 |
| Waste Management, Inc. | WM | Oct. 27 |
| Technology Select Sector SPDR | XLK | Oct. 25 |
| Tech Data Corp. | TECD | Oct. 25 |
| ArcelorMittal | MT | Oct. 24 |
| East West Bancorp, Inc. | EWBC | Oct. 24 |
| PNC Financial Services Group, Inc. | PNC | Oct. 21 |
| SkyWest, Inc. | SKYW | Oct. 21 |
| Lam Research Corp. | LRCX | Oct. 20 |
| Cardtronics | CATM | Oct. 19 |
| Methanex Corp. | MEOH | Oct. 19 |
| SunTrust Banks, Inc. | STI | Oct. 19 |
| FedEx Corp. | FDX | Oct. 18 |
| Copa Holdings | CPA | Oct. 18 |
| Schnitzer Steel Industries | SCHN | Oct. 17 |
| Synnex Corp. | SNX | Oct. 14 |
| Baker Hughes, Inc. | BHI | Oct. 14 |
| Best Buy Co. | BBY | Oct. 10 |
| Regions Financial Corp. | RF | Oct. 6 |
| Netflix, Inc. | NFLX | Oct. 4 |
| Westlake Chemical Corp. | WLK | Sept. 30 |
| VanEck Vectors Oil Services ETF | OIH | Sept. 30 |
| Tessera Technologies, Inc. | TSRA | Sept. 29 |
| Navistar International Corp. | NAV | Sept. 19 |
| Prudential Financial, Inc. | PRU | Sept. 16 |
| iShares Transportation Average | IYT | Sept. 8 |
| Deere & Co. | DE | Sept. 7 |
| Tiffany & Co. | TIF | Sept. 6 |
| MetLife, Inc. | MET | Sept. 6 |
| SPDR S&P Regional Banking ETF | KRE | Aug. 29 |
| iRobot Corp. | IRBT | Aug. 25 |
| EOG Resources, Inc. | EOG | Aug. 19 |
| TowerJazz | TSEM | Aug. 19 |
| Aspen Technology, Inc. | AZPN | Aug. 18 |
| Microsoft Corp. | MSFT | Aug. 5 |
| Sprint Corp. | S | Aug. 5 |
| Microchip Technology, Inc. | MCHP | Aug. 3 |
| Micron Technology, Inc. | MU | Aug. 2 |
| Caterpillar, Inc. | CAT | July 27 |
| CSX Corp. | CSX | July 20 |
| PowerShares QQQ ETF | QQQ | July 19 |
| Industrial Select Sector SPDR | XLI | July 15 |
| Materials Select Sector SPDR | XLB | July 15 |
| VanEck Vectors Semiconductor ETF | SMH | June 23 |
| Yelp, Inc. | YELP | May 16 |
| U.S. Silica Holdings, Inc. | SLCA | Apr. 1 |
| Nvidia Corp. | NVDA | Mar. 21 |
| SPDR S&P Metals & Mining ETF | XME | Feb. 5 |