The Technical Indicator: S&P 500’s bull trend is poised to buck ‘sell in May’ headwind

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The U.S. markets’ worst six months seasonally — May through October — are less than a week away.

This seasonal tendency withstands statistical scrutiny, and is actually a global-market phenomenon, though it’s prone to exceptions. Against this backdrop, the prevailing market technicals support a bullish view.





Before detailing the U.S. markets’ wider view, the S&P 500’s












SPX, +0.03%










 hourly chart highlights the past two weeks.

As illustrated, the S&P has thus far maintained first support matching the 2,080 mark.

Its range top rests at 2,111, and is closely followed by major overhead at 2,117, a level matching the March and November peaks. To this point, the downturn from major resistance has been orderly.



Similarly, the Dow Jones Industrial Average












DJIA, -0.08%










 has pulled in from recent highs.

Consider that its first notable support matches the November peak, technically 17,977.85. Last week’s closing low held four points higher, and the Dow closed Monday at 17,977.

It’s staged a shaky, but thus far successful, test of first support. On further weakness, a deeper floor rests at 17,800, also illustrated on the daily chart.



And the Nasdaq Composite’s












COMP, -0.23%










 near-term backdrop remains weaker.

As illustrated, the index has violated its range bottom, plunging to one-week lows. The 4,921 breakdown point, matching Friday’s high, pivots to resistance.

Conversely, last week’s low held at 4,872, though technical support is better illustrated on the daily chart below.



Widening the view to six months adds perspective.

On this wider view, the Nasdaq has plunged to its former range, violating support spanning from 4,921 to 4,926.

Consider that the 20-day moving average, currently 4,901, has marked a 2016 inflection point. The index hasn’t closed lower since Feb. 16.

This is followed by the 200-day moving average, currently 4,850, and more important support matching the 2014 peak of 4,815. (The April low rests at 4,809.)



Looking elsewhere, the Dow industrials’ wider view remains stronger.

Recall that the 17,980 area marks first support, matching the breakout point from its double bottom defined by the August and January lows. (The specific level rests at 17,977.85, matching Monday’s close of 17,977.24.)

This is followed by the 17,800 support, closely matching the 20-day moving average, and a deeper floor spanning from 17,540 to 17,580.

More broadly, the Dow’s initial pullback from 10-month highs has been orderly, inflicting limited technical damage.



Meanwhile, the S&P 500 has pulled in from five-month highs.

Here again, the initial downturn has been orderly, with the index maintaining first support. Bullish price action.

The bigger picture

Broadly speaking, the U.S. markets’ bigger-picture backdrop remains technical, and constructive. Though the S&P 500 and Dow industrials have pulled in from multi-month highs, each benchmark has closely observed well-defined support.



Moving to the small-caps, the iShares Russell 2000 ETF












IWM, +0.75%










 has sustained a break atop its 200-day moving average, currently 112.15. As always, the 200-day is a widely-tracked longer-term trending indicator, with a posture higher signaling a primary uptrend.

Separately, the small-cap benchmark’s recent rallies have been directionally sharp, fueled by increased volume, while the subsequent pullbacks have been comparably flat.



Meanwhile, the SPDR S&P MidCap 400’s backdrop remains stronger.

It’s recently reached eight-month highs, amid several recent volume spikes, while the intervening pullbacks have been comparably flat. Also notice the impending golden cross, or bullish 50-day/200-day moving average crossover.



Against this backdrop, the S&P 500 has topped slightly under major resistance at 2,117, a level matching the March and November peaks.

Though still underway, and the seasonal backdrop is worth considering, its initial downturn has been orderly, fueled by tame volume and breadth.

More broadly, the S&P 500’s bull trend is underpinned by several positives, detailed last week. Specifically:

  • The trend is frequently punctuated by distinctly technical price action, partly illustrated above.
  • The sub-sector price action is increasingly rotational, fueled by a rolling series of sector breakouts.
  • The major benchmarks are rising on news of any kind, bad or good, including last week’s failed Doha meeting.
  • The uptrend is paced by new leadership, most notably the relative absence of the formerly dominant FANG stocks. (Facebook, Amazon, Netflix, and Google.)

To the extent these traits persist, the market technicals support a bullish view.

Tactically, the S&P 500’s prevailing range spans from 2,080 to 2,117, and a breakout attempt is in play barring a violation of the range bottom. Deeper support rests at the 2,040 mark — closely matching the trendline, and the 2015 close — and a posture higher supports a bullish longer-term bias.

Also see: Broadening sector participation signals bull trend has room to run.

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.



Initially profiled Feb. 18, the Market Vectors Junior Gold Miners ETF












GDXJ, +1.94%










 has returned 30.9%.

Though near-term extended, and due to consolidate, the group remains well positioned for the longer-term. Consider that the April breakout has been directionally sharp, punctuated by consecutive volume spikes.

First support rests at 33, and is followed by a firmer floor around 30.75, closely matching the 2015 peak and trendline support. The group’s longer-term bias supports a bullish view barring a violation.



Callon Petroleum Co.












CPE, +4.07%










 is a well positioned mid-cap name.

As illustrated, the shares have recently staged a strong-volume spike, reaching 52-week highs after the company announced the pricing of a common stock offering.

Underlying the upturn, its relative strength index (not illustrated) has concurrently reached a yearly peak, positioning the shares for a potentially more decisive breakout. First support rests fractionally above 10, and its technical bias points higher barring a violation.



Universal Display Corp.












OLED, +1.08%










 is a mid-cap developer of organic light emitting diode (OLED) technologies for use in flat panel displays.

Earlier this month, the shares knifed to five-year highs, clearing resistance matching the 2015 peak.

The ensuing pullback has been flat, fueled by decreased volume, positioning the shares to build on the initial spike. First support matches last week’s low, and is followed by the breakout point, circa 56.



Emergent Biosolutions, Inc.












EBS, -1.40%










 is a well positioned mid-cap name.

The shares initially spiked three weeks ago, clearing the February peak amid increased volume.

It’s subsequently established a tight April range, compressing between the breakout point and the 2015 peak. Monday’s close marked a nominal record high, positioning the shares for a potentially more decisive breakout.

Emergent Biosolutions is also well positioned on the weekly chart.



Sonic Corp.












SONC, +1.64%










 is a fast-food restaurant operator positioned to rise.

Late last month, the shares gapped to 52-week highs, rising after the company’s strong second-quarter results.

The ensuing pullback has been flat, fueled by decreased volume, placing the shares at an attractive entry near gap support and 4.4% under the April peak. More broadly, Sonic Corp. is challenging record territory, better illustrated on the weekly chart.



Alcoa, Inc.












AA, +3.25%










 is a well positioned large-cap name.

Technically, the shares have knifed from a bullish cup-and-handle, a pattern recently underpinned by the 200-day moving average.

The subsequent pullback has been orderly, placing the shares at an attractive entry near the breakout point and 5.7% under the April peak.

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
Zillow Group, Inc. Z Apr. 25
Polaris Industries, Inc. PII Apr. 25
WellCare Health Plans, Inc. WCG Apr. 25
Canadian Pacific Railway CP Apr. 25
Marathon Petroleum Corp. MPC Apr. 22
Trimble Navigation TRMB Apr. 22
BioMarin Pharmaceutical, Inc. BMRN Apr. 22
GW Pharmaceuticals GWPH Apr. 21
Aspen Technology, Inc. AZPN Apr. 21
Express Scripts ESRX Apr. 21
Alibaba Group Holding BABA Apr. 21
Citigroup, Inc. C Apr. 20
Fitbit, Inc. FIT Apr. 20
Actuant Corp. ATU Apr. 20
Chevron Corp. CVX Apr. 20
Materials Select Sector SPDR XLB Apr. 20
iShares MSCI Brazil ETF EWZ Apr. 19
Agios Pharmaceuticals, Inc. AGIO Apr. 18
Parker-Hannifin Corp. PH Apr. 18
Universal Health Services, Inc. UHS Apr. 18
Taho Resources, Inc. TAHO Apr. 18
Newmont Mining Corp. NEM Apr. 15
Genesee & Wyoming, Inc. GWR Apr. 15
Alder Biopharmaceuticals, Inc. ALDR Apr. 15
First Republic Bank FRC Apr. 15
PrivateBancorp, Inc. PVTB Apr. 15
SPDR S&P Regional Banking ETF KRE Apr. 14
Qualcomm, Inc. QCOM Apr. 14
Energy Select Sector SPDR XLE Apr. 13
Gulfport Energy Corp. GPOR Apr. 13
FMC Technologies, Inc. FTI Apr. 13
Helmerich & Payne, Inc. HP Apr. 13
Tesla Motors, Inc. TSLA Apr. 12
HP, Inc. HPQ Apr. 12
Owens-Illinois, Inc. OI Apr. 12
Chart Industries, Inc. GTLS Apr. 12
Whiting Petroleum Corp. WLL Apr. 11
Cabot Oil & Gas Corp. COG Apr. 11
Incyte Corp. INCY Apr. 11
Church & Dwight Co., Inc. CHD Apr. 11
Pepsico, Inc. PEP Apr. 7
Anthem, Inc. ANTM Apr. 7
Hess Corp. HES Apr. 7
Juno Therapeutics, Inc. JUNO Apr. 7
Technology Select Sector SPDR XLK Apr. 6
Continental Resources, Inc. CLR Apr. 6
Open Text Corp. OTEX Apr. 6
Seabridge Gold, Inc SA Apr. 6
Merck & Co. MRK Apr. 5
Silicon Motion Technology Corp. SIMO Apr. 5
Fabrinet FN Apr. 5
Vantiv, Inc. VNTV Apr. 4
Analog Devices, Inc. ADI Apr. 4
Kinross Gold Corp. KGC Apr. 4
FedEx Corp. FDX Apr. 1
U.S. Silica Holdings, Inc. SLCA Apr. 1
Energy Recovery, Inc. ERII Apr. 1
Energen Corp. EGN Apr. 1
Consumer Discretionary SPDR XLY Apr. 1
Inphi Corp. IPHI Mar. 31
iShares Emerging Markets ETF EEM Mar. 30
General Electric GE Mar. 29
American Tower Corp. AMT Mar. 29
Adobe Systems, Inc. ADBE Mar. 28
Schnitzer Steel Industries SCHN Mar. 28
Microsemi Corp. MSCC Mar. 28
SBA Communications, Inc. SBAC Mar. 28
Genuine Parts Co. GPC Mar. 24
Amedisys, Inc. AMED Mar. 24
Industrial Select Sector SPDR XLI Mar. 23
Bruker Corp. BRKR Mar. 23
Intercept Pharmaceuticals, Inc. ICPT Mar. 23
KB Home KBH Mar. 23
Orbotech, Ltd. ORBK Mar. 23
Kansas City Southern KSU Mar. 22
Rice Energy, Inc. RICE Mar. 22
Ulta Salon, Cosmetics & Fragrance ULTA Mar. 22
Nvidia Corp. NVDA Mar. 21
iShares Transportation Average IYT Mar. 18
Proto Labs, Inc. PRLB Mar. 18
Mobileye MBLY Mar. 18
Apache Corp. APA Mar. 18
AK Steel Holding Corp. AKS Mar. 17
Devon Energy Corp. DVN Mar. 17
Patterson-UTI Energy, Inc. PTEN Mar. 17
Market Vectors Oil Services ETF OIH Mar. 16
SM Energy Co. SM Mar. 16
Anadarko Petroleum Corp. APC Mar. 16
Yum Brands, Inc. YUM Mar. 16
Gilead Sciences, Inc. GILD Mar. 15
Kate Spade & Co. KATE Mar. 15
Applied Materials, Inc. AMAT Mar. 14
Stratasys, Ltd. SSYS Mar. 14
Reliance Steel & Aluminum Co. RS Mar. 11
Goldcorp Inc. GG Mar. 11
Cogent Communications Holdings CCOI Mar. 11
Cyrusone, Inc. CONE Mar. 8
Steel Dynamics, Inc. STLD Mar. 8
Generac Holdings, Inc. GNRC Mar. 8
TJX Companies, Inc. TJX Mar. 7
iShares China Large-Cap ETF FXI Mar. 3
Nucor Corp. NUE Mar. 3
Teleflex, Inc. TFX Mar. 3
Apple, Inc. AAPL Mar. 2
Cummins, Inc. CMI Mar. 2
Kindred Healthcare, Inc. KND Mar. 2
Orbcomm, Inc. ORBC Feb. 29
Himax Technologies, Inc. HIMX Feb. 25
Copa Holdings CPA Feb. 25
Agnico Eagle Mines AEM Feb. 24
II-VI, Inc. IIVI Feb. 24
Garmin, Ltd. GRMN Feb. 22
U.S. Steel Corp. X Feb. 22
Johnson & Johnson JNJ Feb. 19
Pan American Silver Corp. PAAS Feb. 19
Silver Wheaton Corp. SLW Feb. 19
Market Vectors Junior Gold Miners ETF GDXJ Feb. 18
SPDR S&P Metals & Mining ETF XME Feb. 5
Market Vectors Gold Miners ETF GDX Feb. 5
SPDR Gold Trust GLD Feb. 4
Consumer Staples Select Sector SPDR XLP Feb. 1
Stryker Corp. SYK Jan. 29
iShares Silver Trust SLV Jan. 28
Coach, Inc. COH Jan. 28
Utilities Select Sector SPDR XLU Jan. 25
Huntington Ingalls Industries, Inc. HII Jan. 13
Barrick Gold Corp. ABX Jan. 11
Wal-Mart Stores, Inc. WMT Jan. 6
American Water Works Co. AWK Dec. 21
ITC Holdings Corp. ITC Dec. 21
Equity LifeStyle Properties, Inc. ELS Dec. 16
McDonald’s Corp. MCD Oct. 8
Nasdaq, Inc. NDAQ Sept. 28



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