Charting market rotation: S&P 500, Dow industrials challenge record highs – MarketWatch

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 major U.S. benchmarks are off to a strong November start, rising amid bullish longer-term trends.

Against this backdrop, the S&P 500 and Dow industrials have extended aggressive rally attempts — briefly tagging record highs to start this week — amid market rotation and expanding sector participation.

MW IT354 202011 20201110094110 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

MW IT355 202011 20201110094111 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

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

As illustrated, the S&P has staged a technical breakout, of sorts.

Specifically, the index briefly tagged record highs Monday before pulling in to the former range.

Monday’s close (3,550.5) closely matched the October peak (3,550), and marked the S&P’s second-best close on record.

MW IT347 202011 20201110094104 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Similarly, the Dow Jones Industrial Average US:DJIA  has gapped sharply higher, briefly tagging record territory.

Consider that Monday’s session high (29,933) registered within view of the marquee 30,000 mark.

Tactically, the Dow is traversing a much less-charted patch, better illustrated on the daily chart.

MW IT344 202011 20201110094102 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Against this backdrop, the Nasdaq Composite US:COMP has diverged from the other benchmarks.

To be sure, the index briefly tagged record territory at Monday’s session high (12,108).

But the subsequent selling pressure punctuated a failed test of resistance, better illustrated below.

(On a granular note, Monday’s close (11,703) matched the October gap (11,704).)

MW IT345 202011 20201110094103 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has balked at major resistance matching the September peak. In the process, the index formed a bearish engulfing pattern, the long red bar, engulfing the range of the prior two sessions.

The question now is the aggressiveness of the downside follow-through, or lack thereof.

Tactically, familiar support (11,460) is followed by the 50-day moving average, currently 11,304, and the former breakout point (11,245).

Delving deeper, likely last-ditch support matches the July peak (10,840). A sustained posture higher signals a range-bound backdrop, and a bullish intermediate-term bias.

The prevailing pullback punctuates a massive 9.0% one-week rally to start November.

MW IT375 202011 20201110112302 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

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

Consider that the index has gapped sharply higher — briefly clearing its range top — unlike the Nasdaq Composite.

Tactically, the Dow’s record close (29,551.42) and the February peak (29,568.57) — formerly the record peak — remain overhead inflection points.

More broadly, the prevailing upturn punctuates a successful test of the 200-day moving average, and originates from three-month lows.

MW IT354 202011 20201110094110 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Meanwhile, the S&P 500 has tagged a record high, rising from a double bottom defined by the September and October lows.

The prevailing upturn originates from major support. Recall that the October low (3,233.9) closely matched the June peak (3,233).

The bigger picture

As detailed above, the major U.S. benchmarks have diverged this week, and the bigger-picture backdrop is not one-size-fits-all.

On a headline basis, the S&P 500 and Dow industrials have extended their rally attempts, gapping higher to briefly tag record territory.

Meanwhile, the Nasdaq Composite has balked at its range top, drawing respectable selling pressure near major resistance.

Amid the cross currents, the bigger-picture backdrop remains comfortably bullish to start November and the best six months seasonally — November through April.

MW IT348 202011 20201110094105 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Moving to the small-caps, the iShares Russell 2000 ETF has also staged a breakout of sorts.

Here again, Monday’s session high (178.10) marked an all-time high. Still, the session close (169.55) registered comfortably under its record close (173.02), established August 2018.

Slightly more broadly, the prevailing upturn punctuates a bullish island reversal to start November.

MW IT352 202011 20201110094109 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Similarly, the SPDR S&P MidCap 400 ETF has tagged an intraday record high.

Still, the session close (380.10) registered under the record close (384.02), established February 2020.

Combined, the small- and mid-cap benchmarks are near-term extended, though the strong-volume breakouts confirm the prevailing uptrends.

MW IT356 202011 20201110094112 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Looking elsewhere, the SPDR Trust S&P 500 has also tagged record territory.

Consider that the session close (354.56) marked the SPY’s second-best on record, placing it fractionally atop the September peak (354.02).

MW IT355 202011 20201110094111 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Placing a finer point on the S&P 500, the index has extended its rally attempt, rising to briefly tag record highs.

To reiterate, Monday’s close (3,550.5) closely matched the October peak (3,549.9), and marked the S&P’s second-best close on record.

Tactically, deeper floors match the October gap — at 3,482 and 3,500.

MW IT354 202011 20201110094110 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

More broadly, the S&P 500 has extended an aggressive November rally attempt.

Against this backdrop, Monday’s price action threaded the needle on a slightly granular technical point.

Market bears will point to a failed breakout attempt, ultimately capped by the September peak.

Conversely, market bulls will point to a sharp gap higher, and a close fractionally atop the October peak. The upturn narrowly punctuates a double bottom — the W formation — defined by the September and October lows.

Tactically, an intermediate-term target continues to project to the 3,800 area on follow-through. (The target technically rests at 3,798.)

Beyond technical levels, the S&P 500 is near-term extended — and due to consolidate — following a seven-session rally spanning as much as 412 points, or 12.7%. Its more important intermediate-term bias remains comfortably bullish, based on today’s backdrop.

Also see: Charting a bullish reversal, S&P 500 spikes from key support amid election overhang.

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.

Sector participation broadens amid vaccine-fueled market rally

Drilling down further, the prevailing leg higher has been relatively broadly-based amid expanding sector participation. Still, one former sector leader — large-cap technology — has diverged amid market rotation. Several groups exemplify the prevailing backdrop.

MW IT359 202011 20201110094115 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

To start, the Industrial Select Sector SPDR US:XLI  has taken flight, briefly tagging all-time highs. (Yield = 1.7%.)

The strong-volume gap higher confirms the group’s primary uptrend.

Though near-term extended, and due to consolidate, the group is attractive on a pullback. Tactically, the bottom of the gap (81.70) closely matches the breakout point.

MW IT357 202011 20201110094113 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Meanwhile, the Materials Select Sector SPDR has knifed more firmly to record territory, building on last week’s initial breakout. (Yield = 1.7%.)

The prevailing upturn punctuates a double bottom — the W formation — defined by the September and October lows.

Here again, the group is near-term extended and due a cooling-off period. Tactically, gap support (69.40) is followed by the firmer breakout point (67.00).

Financials take flight, gap to eight-month highs
MW IT358 202011 20201110094114 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Looking elsewhere, the Financial Select Sector SPDR US:XLF  has also come to life technically.

As illustrated, the group has gapped sharply atop trendline resistance, reaching eight-month highs.

Slightly more broadly, the strong-volume spike builds on an early-November rally atop the 50- and 200-day moving averages, also consistent with a major trend shift.

Tactically, the top of the gap (26.65) is followed by an inflection point closely matching the September peak (26.00).

MW IT351 202011 20201110094108 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Similarly, the SPDR S&P Regional Banking ETF US:KRE  has taken flight, gapping to eight-month highs.

The strong-volume rally punctuates a double bottom defined by the July and September lows. Tactically, the top of the gap (45.22) is followed by the deeper breakout point (42.20).

Separately, notice the pending golden cross — or bullish 50-day/200-day moving average crossover — signaling that the intermediate-term uptrend has overtaken the longer-term trend.

Fundamentally, the financials’ resurgence has surfaced amid a surging 10-year Treasury note yield, detailed Monday.

As always, the banks benefit from rising yields in the form of an improved rate spread, or the difference between the rate at which a bank borrows, and the rate it subsequently lends to customers.

Transportation sector challenges key resistance
MW IT349 202011 20201110094106 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Looking elsewhere, the iShares Transportation Average ETF US:IYT  is trying to break out.

Technically, the group tagged an intraday record high before reversing to close slightly under resistance.

More broadly, the group is rising from a nearly three-month bullish continuation pattern. Recall that the early-August rally marked a two standard deviation breakout, encompassing four straight closes atop the 20-day Bollinger bands.

As an economically-sensitive sector — raw materials are transported to manufacturing facilities, then finished goods are re-transported to points of sale — the group’s breakout attempt supports the bull case.

MW IT372 202011 20201110104602 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Drilling down within the transportation sector, the U.S. Global Jets ETF US:JETS  has taken flight.

Consider that vaccine-fueled optimism propelled a massive strong-volume gap atop the 200-day moving average, a widely-tracked longer-term trending indicator.

Large-cap technology lags behind amid market rotation
MW IT353 202011 20201110094110 NS ProxyEgg Charting market rotation: S&P 500, Dow industrials challenge record highs - MarketWatch

Finally, the PowerShares QQQ Trust US:QQQ  tracks the Nasdaq 100 Index offering a large-cap technology sector proxy.

Notably, the QQQ has not broken out.

To the contrary, the QQQ has formed a bearish engulfing pattern slightly under major resistance. (The long red bar, engulfing the range of the prior two sessions.)

The strong-volume downturn signals a potential temporary shift in market leadership.

More broadly, the groups detailed exemplify a rotational market backdrop, punctuated by broadening sector participation. The November sector price action, on balance, strengthens the bull case.

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* (Click symbol for chart.) Date Profiled
Flex, Inc. FLEX Nov. 9
Snap, Inc. SNAP Nov. 9
Norfolk Southern Corp. NSC Nov. 9
Materials Select Sector SPDR XLB Nov. 6
Communications Services Select Sector SPDR XLC Nov. 5
Health Care Select Sector SPDR XLV Nov. 5
Alphabet, Inc. GOOGL Nov. 5
Uber Technologies, Inc. UBER Nov. 5
Keysight Technologies, Inc. KEYS Nov. 4
Harley-Davidson, Inc. HOG Nov. 4
Garmin, Ltd. GRMN Nov. 4
Pinterest, Inc. PINS Nov. 3
Sony Corp. SNE Nov. 3
8×8, Inc. EGHT Nov. 3
Exact Sciences Corp. EXAS Nov. 2
Universal Display Corp. OLED Nov. 2
Dentsply Sirona, Inc. XRAY Oct. 27
Maxim Integrated Products, Inc. MXIM Oct. 21
Jazz Pharmaceuticals, plc JAZZ Oct. 21
The Travelers Companies, Inc. TRV Oct. 21
Micron Technology, Inc. MU Oct. 20
Vulcan Materials Co. VMC Oct. 19
Utilities Select Sector SPDR XLU Oct. 19
ON Semiconductor Corp. ON Oct. 16
Ford Motor Co. F Oct. 15
Texas Instruments, Inc. TXN Oct. 15
Skyworks Solutions, Inc. SWKS Oct. 14
First Solar, Inc. FSLR Oct. 13
Nevro Corp. NVRO Oct. 12
Teradyne, Inc. TER Oct. 12
SPDR S&P Homebuilders ETF XHB Oct. 9
Shake Shack, Inc. SHAK Oct. 9
SPDR S&P Biotech ETF XBI Oct. 8
Alexion Pharmaceuticals, Inc. ALXN Oct. 8
Twilio, Inc. TWLO Oct. 8
Cloudflare, Inc. NET Oct. 7
Ceridian HCM Holding, Inc. CDAY Oct. 7
Gap, Inc. GPS Oct. 6
Motorola Solutions, Inc. MSI Oct. 6
RSailPoint Technology Holdings, Inc. SAIL Oct. 1
Martin Marietta Materials, Inc. MLM Sept. 30
Whirlpool Corp. WHR Sept. 29
Abercrombie & Fitch Co. ANF Sept. 29
Blueprint Medicines Co. BPMC Sept. 28
Zendesk, Inc. ZEN Sept. 23
Datadog, Inc. DDOG Sept. 23
Scientific Games Corp. SGMS Sept. 23
Crocs, Inc. CROX Sept. 14
Five Below, Inc. FIVE Sept. 10
Eastman Chemical Co. EMN Sept. 10
International Paper Co. IP Sept. 3
Anaplan, Inc. PLAN Sept. 2
Celanese Corp. CE Aug. 26
Westlake Chemical Corp. WLK Aug. 25
Deere & Co. DE Aug. 24
Expedia Group, Inc. EXPE Aug. 24
Johnson Controls International JCI Aug. 21
Canadian Solar, Inc. CSIQ Aug. 20
General Motors Co. GM Aug. 20
Starbucks Corp. SBUX Aug. 18
Builders FirstSource, Inc. BLDR Aug. 18
Steel Dynamics, Inc. STLD Aug. 17
Elanco Animal Health, Inc. ELAN Aug. 17
Brinker International, Inc. EAT Aug. 13
Enphase Energy, Inc. ENPH Aug. 13
Nucor Corp. NUE Aug. 11
Freeport McMoRan, Inc. FCX Aug. 10
Natera, Inc. NTRA Aug. 10
McDonald’s Corp. MCD Aug. 7
Industrial Select Sector SPDR XLI Aug. 6
Penn National Gaming, Inc. PENN July 30
Procter & Gamble Co. PG July 29
SPDR S&P Metals & Mining ETF XME July 28
iShares MSCI South Korea ETF EWY July 28
Advanced Micro Devices, Inc. AMD July 23
Best Buy Co., Inc. BBY July 22
Materials Select Sector SPDR XLB July 20
Caterpillar, Inc. CAT July 20
Roku, Inc. ROKU July 16
Cognizant Technology Solutions, Inc. CTSH July 16
Costco Wholesale Corp. COST July 15
Consumer Discretionary Select Sector SPDR XLY July 13
SunPower Corp. SPWR July 13
Walmart, Inc. WMT July 8
Danaher Corp. DHR June 24
Fiverr International, Ltd. FVRR June 19
HubSpot, Inc. HUBS June 8
Square, Inc. SQ June 8
FedEx Corp. FDX June 3
SPDR S&P Retail ETF XRT June 3
iShares MSCI Japan ETF EWJ May 29
Synopsis, Inc. SNPS May 27
Agilent Technologies, Inc. A May 15
Qualcomm, Inc. QCOM May 12
Facebook, Inc. FB May 7
Dollar General Corp. DG Apr. 28
ServiceNow, Inc. NOW Apr. 27
Five9, Inc. FIVN Apr. 24
Chewy, Inc. CHWY Apr. 24
Tesla, Inc. TSLA Apr. 23
VanEck Vectors Semiconductor ETF SMH Apr. 17
Veeva Systems, Inc. VEEV Apr. 17
Okta, Inc. OKTA Apr. 16
Target Corp. TGT Apr. 16
Invesco QQQ Trust QQQ Apr. 14
Zscaler, Inc. ZS Apr. 3
Apple, Inc. AAPL Mar. 27
Nvidia Corp. NVDA Mar. 27
iShares MSCI Emerging Markets ETF EEM Mar. 19
SPDR Gold Shares ETF GLD Jan. 2
Microsoft Corp. MSFT Feb. 22
* Click each symbol for current chart.

Source of this news: https://www.marketwatch.com/story/charting-market-rotation-sp-500-dow-industrials-challenge-record-highs-2020-11-10-121034810

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