The Technical Indicator: Charting Market Cross Currents: Dow Industrials Whipsaw At The 200-day Average

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The U.S. benchmarks are approaching the second-quarter close amid increased market volatility and potentially consequential price action.

Consider that the Dow industrials have violated the marquee 200-day moving average — closing lower for the first time in two years — while the comparably resilient S&P 500 has nonetheless violated notable support for the first time in nearly one month.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.55%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended the June downturn, violating the breakout point (2,742). A retest of the 50-day moving average, currently 2,717, remains underway.

On further weakness, deeper support matches the March gap (2,710) and is followed by an inflection point at the 2017 peak (2,695).

Meanwhile, the Dow Jones Industrial Average DJIA, +0.47%  has staged a headline technical event.

Specifically, the Dow has violated its 200-day moving average, currently 24,292, closing lower for the first time since June 2016, a move then fueled by Brexit-related volatility.

The downturn punctuates a failed retest of the 50-day moving average from underneath. Shaky, if not outright bearish, price action.

Against this backdrop, the Nasdaq Composite has reversed sharply from record highs.

In the process, the index has violated its breakout point (7,637) — a level matching the March peak — plunging to its next notable floor, better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has violated its breakout point amid technical price action.

Consider that Monday’s session high (7,639) and session low (7,477) closely matched its headline inflection points, illustrated above. (Also see the June 19 review.)

Delving deeper, the Nasdaq’s 50-day moving average, currently 7,419, is rising toward support. Its intermediate-term bias remains bullish pending further damage.

Looking elsewhere, the Dow industrials’ backdrop is strikingly weaker.

Recall two inflection points, detailed previously:

  • The 200-day moving average, currently 24,292.
  • Support matching the late-May, “Italy-induced” low of 24,247.

On a headline basis, Monday’s close (24,252) punctuated the Dow’s first violation of its 200-day moving average since June 2016. The index is vying to avoid its first consecutive closes under the 200-day since March 2016.

Still, the Dow has maintained late-May low (24,247) by a narrow five-point margin. An eventual close lower would mark a “lower low” — combined with a violation of the 200-day moving average — more firmly consistent with a primary trend shift.

Separately, consider that the 200-day moving average’s slope is ascending, still consistent with a primary uptrend.

Combined, the June downturn has inflicted genuine damage, though a primary trend shift has not been signaled. The ongoing retest of the late-May low is worth tracking.

(Separately, though the 200-day moving average is a marquee trending indicator, it’s a single variable, to be gauged in the context of other variables.)

Meanwhile, the S&P 500 has extended its pullback from the range top.

In the process, the S&P has violated its breakout point (2,742) pulling in to the 50-day moving average, currently 2,717.

Monday’s close (2,717.1) closely matched the 50-day, and the prevailing retest remains underway.

The bigger picture

Collectively, the U.S. benchmarks are approaching the second-quarter close, the month-end, amid technical cross currents.

On a headline basis, the Dow industrials have closed under the 200-day moving average for the first time in nearly two years, since June 27, 2016.

Still, as always, the Dow Jones Industrials Average is least representative U.S. benchmark. It has just 30 components, and is the lone price-weighted index, meaning that higher-priced names are more influential in its movement.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +0.85%  has reversed from record territory amid increased volume.

Immediate support remains poorly-defined, though a near-term floor (164.40) is followed by the much firmer breakout point (160.00).

Similary, the S&P MidCap 400 has extended its pullback from record highs amid thus far limited technical damage.

Tactically, an inflection point matches the January gap (357.90) and is followed by the 50-day moving average, currently 353.80.

Looking elsewhere, the SPDR Trust S&P 500 has pulled in from three-month highs.

The former breakout point (274.25) pivots to resistance. Conversely, the 50-day moving average, currently 271.50, is followed by support matching the bottom of the March gap (268.87).

This week’s low (269.10) has registered fractionally above support.

Summing up the backdrop

Collectively, the bigger-picture technical backdrop is not one-size-fits all.

Very generally, the prevailing trade tensions have pressured the Dow industrials and the global markets — detailed in the next section — inflicting pronounced damage, in spots.

Conversely, U.S. small-caps and domestic-centric sectors remain comparably resilient, and largely unscathed.

Against this backdrop, the S&P 500’s prevailing backdrop remains relatively straightforward.

On a headline basis, the S&P’s intermediate-term uptrend is intact. The index has maintained its 50-day moving average, and remains within a series of “higher highs” and “higher lows” preserving its rally attempt.

Tactically, a major floor broadly spans from 2,673 to 2,695, levels matching the 2017 close and the 2017 peak.

Recall that the late-May “Italy-induced” low (2,676) punctuated a fleeting, but successful, retest of major support. An eventual violation would mark a “lower low” raising a caution flag.

Delving slightly deeper, the S&P’s 200-day moving average, currently 2,666, is rising toward support.

As always, it’s not what the markets do it’s how they do it. Generally speaking, the S&P 500’s intermediate- to longer-term technical bias remains bullish barring a violation of the 2,673 support.

See also: S&P 500 nails major support amid fragile global market backdrop.

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.

Charting the traditional U.S. sector leaders

Drilling down further, the conventional U.S. sectors leaders — the financials, transports and technology sector — continue to diverge. Consider the following:

To start, the Financial Select Sector SPDR XLF, -0.26%  is precariously positioned. Monday’s close marked the year’s worst close.

Technically, the June downturn punctuates a failed test of trendline resistance, placing major support, circa 26.50, under siege. On further weakness, deeper support matches the September breakout point (25.50) while a downside target projects to the 24.70 area.

Conversely, an eventual close atop the 50- and 200-day moving averages — the 27.60 area — would place the brakes on bearish momentum.

Meanwhile, the transports’ backdrop is comparably stronger, though the group has returned to its former range.

Specifically, the iShares Transportation Average ETF has violated major support, also gapping under the 50-day moving average, on increased volume.

Underlying the downturn, its relative strength index (not illustrated) has registered three-month lows, leaving the group vulnerable to downside follow-through. The 200-day moving average, currently 186.50, is firmly within view.

Conversely, a swift reversal atop the breakdown point (195.00) would neutralize this week’s downdraft.

Combined, the transports’ intermediate-term bias is in flux — the group is traversing the range — against a still bullish longer-term backdrop.

Looking elsewhere, the PowerShares QQQ ETF QQQ, +0.95%  — a large-cap technology proxy — remains incrementally stronger.

To be sure, the group has violated its breakout point, circa 175, reaching less-charted territory on increased volume.

Still, the downturn has been underpinned by next support (169.75), almost precisely, an area closely followed by the 50-day moving average.

Put differently, limited technical damage has thus far been inflicted. The group’s intermediate-term bias remains bullish.

On a stray U.S. sector note, the consumer staples sector XLP, -0.24% profiled June 13, is not a conventional market leader. (Yield = 3.1%.)

Still, the group has extended its rally attempt, consistent with a rotational market backdrop. (Recall that the group turned higher to start June — concurrently with transports and technology sector breakouts — signaling that this week’s follow-through is not necessarily strictly safe-haven fueled.)

Related names setting up well include Clorox Co., General Mills, Church & Dwight Co., Kimberly-Clark Corp. and Procter & Gamble Co.

Beyond the U.S. — Charting the global market damage

Moving beyond the U.S., persistent trade tensions have pressured the global markets, also detailed last week.

To start, the iShares China Large-Cap ETF FXI, +0.13%  has reached 10-month lows, extending the June downdraft.

Tactically, the shares have reached a near-term projected target, circa 42.90. (The target projects from the double top, defined by the May and June peaks.)

Still, the immediate rally attempt has registered as flat, or nonexistent, and the shares remain vulnerable on the three-year chart.

To reiterate, a reversal to the former range — atop the 45.50 area — would mark an early step toward stabilization.

Similarly, the iShares MSCI Japan ETF EWJ, +0.81%  has extended the June technical breakdown, asserting a posture under the 200-day moving average for the first time since July 2016.

Tactically, resistance spans from 59.20 to 59.77, the latter matching the 200-day moving average. A close higher would place the brakes on bearish momentum.

Finally, the iShares Europe ETF IEV, +0.04%  has also extended the June downdraft.

The prevailing downturn punctuates a double top — defined by the April and May peaks — and subsequent failed test of the 50- and 200-day moving averages from underneath.

An eventual close atop the breakdown point (45.50) would mark a step toward stabilization.

Combined, the prevailing trade-tension backdrop has pressured the Dow industrials and the global markets. Conversely, U.S. small-caps and domestic-centric sectors — including the retailers — have generally experienced a market tailwind.

Amid the cross currents, the prospect of incremental deterioration, and potential collateral damage, remains a “watch out.”

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
iRobot Corp. IRBT June 25
CF Industries Holdings, Inc. CF June 25
Marathon Oil Corp. MRO June 25
Procter & Gamble Co. PG June 22
Semtech Corp. SMTC June 22
Lands’ End, Inc. LE June 21
Endeavor Silver Corp. EXK June 21
Merck & Co., Inc. MRK June 21
Williams-Sonoma, Inc. WSM June 20
Spark Therapeutics, Inc. ONCE June 20
Vishay Intertechnology, Inc. VSH June 18
Dillard’s, Inc. DDS June 18
Tyson Foods, Inc. TSN June 18
Alphabet, Inc. GOOGL June 15
Allergan AGN June 15
Pepsico, Inc. PEP June 14
Bunge Limited BG June 14
Glu Mobile, Inc. GLUU June 14
Commvault Systems, Inc. CVLT June 13
Mosaic Co. MOS June 13
Consumer Staples Select Sector SPDR XLP June 13
iShares Transportation Average ETF IYT June 12
SPDR S&P Regional Banking ETF KRE June 12
Roku, Inc. ROKU June 12
Analog Devices, Inc. ADI June 12
Viking Therapeutics, Inc. VKTX June 12
Sohu.com Limited SOHU June 11
Medicines Co. MDCO June 11
Capital One Financial Corp. COF June 8
Health Care Select Sector SPDR XLV June 8
Monster Beverage Corp. MNST June 7
Tesla, Inc. TSLA June 7
VMWare, Inc. VMW June 6
Foot Locker, Inc. FL June 6
SPDR S&P Biotech ETF XBI June 5
Twitter, Inc. TWTR June 5
Kohl’s Corp. KSS June 5
Pan American Silver Corp. PAAS May 25
Agios Pharmaceuticals, Inc. AGIO May 24
Immunomedics, Inc. IMMU May 24
Supernus Pharmaceuticals, Inc. SUPN May 23
Electronic Arts, Inc. EA May 22
Momo, Inc. MOMO May 22
Union Pacific Corp. UNP May 21
Twilio, Inc. TWLO May 21
Intercept Pharmaceuticals, Inc. ICPT May 21
Energy Select Sector SDPR XLE May 18
Range Resources Corp. RRC May 17
SPDR S&P Metals & Mining ETF XME May 17
SPDR S&P Retail ETF XRT May 15
Lowe’s Companies, Inc. LOW May 14
Texas Instruments, Inc. TXN May 11
PowerShares QQQ Trust QQQ May 10
Facebook, Inc. FB May 9
Electronics for Imaging, Inc. EFII May 9
SPDR S&P Oil and Gas Exploration & Production ETF XOP May 9
Coupa Software, Inc. COUP May 8
Apple, Inc. AAPL May 7
PDC Energy, Inc. PDCE May 7
Under Armour, Inc. UA May 2
Norfolk Southern Corp. NSC May 2
Advanced Micro Devices, Inc. AMD May 1
UnitedHealth Group, Inc. UNH Apr. 30
Nike, Inc. NKE Apr. 30
DSW, Inc. DSW Apr. 30
Home Depot, Inc. HD Apr. 27
Noble Energy, Inc. NBL Apr. 27
Sanmina Corp. SANM Apr. 27
Costco Wholesale Corp. COST Apr. 26
CSX Corp. CSX Apr. 26
Applied Optoelectronics, Inc. AAOI Apr. 19
Chipotle Mexican Grill, Inc. CMG Apr. 19
Wingstop, Inc. WING Apr. 19
F5 Networks, Inc. FFIV Apr. 18
EOG Resources, Inc. EOG Apr. 11
Autodesk, Inc. ADSK Apr. 10
NetApp, Inc. NTAP Apr. 9
Whiting Petroleum Corp. WLL Mar. 22
Domino’s Pizza, Inc. DPZ Mar. 21
Orbotech Ltd. ORBK Mar. 16
Veeva Systems, Inc. VEEV Mar. 15
Autohome, Inc. ATHM Mar. 14
Burlington Stores, Inc. BURL Mar. 14
Baozun, Inc. BZUN Mar. 9
AxoGen, Inc. AXGN Mar. 8
TJX Companies, Inc. TJX Mar. 6
Chart Industries, Inc. GTLS Mar. 6
Macy’s, Inc. M Mar. 5
Five9, Inc. FIVN Mar. 5
LivePerson, Inc. LPSN Feb. 28
VeriSign, Inc. VRSN Feb. 26
Shutterfly, Inc. SFLY Feb. 22
ServiceNow, Inc. NOW Feb. 21
Palo Alto Networks, Inc. PANW Feb. 16
Adobe Systems, Inc. ADBE Feb. 16
Salesforce.com, Inc. CRM Feb. 12
Fortinet, Inc. FTNT Jan 19
Insulet Corp. PODD Jan. 17
Arrowhead Pharmaceuticals Corp. ARWR Jan. 11
Sarepta Therapeutics, Inc. SRPT Jan. 3
MSCI, Inc. MSCI Nov. 20
Motorola Solutions, Inc. MSI Nov. 14
Akamai Technologies, Inc. AKAM Oct. 30
Lululemon Athletica, Inc. LULU Oct. 24
HubSpot, Inc. HUBS Oct. 4
XPO Logistics, Inc. XPO Oct. 2
Nvidia Corp. NVDA Sept. 27
Bottomline Technologies, Inc. EPAY July 13
GrubHub, Inc. GRUB May 4
Square, Inc. SQ Mar. 3
Netflix, Inc. NFLX Oct. 4
Microsoft Corp. MSFT Aug. 5