Market bulls show signs of a pulse


CINCINNATI (MarketWatch) — With Thursday’s strong start, the “expected” oversold rally attempt is underway.

The question now is whether it punctuates a meaningful market low, or conversely, registers as a weak corrective bounce. The charts below 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 S&P has survived its second recent test of the February low, detailed Wednesday.

With Thursday’s strong start, its first significant resistance rests at its breakdown point of 1,775.

Meanwhile, the Dow industrials’ near-term backdrop is weaker.

The index topped Wednesday at its 200-day moving average — almost to the decimal — and has broken atop this level with Thursday’s strong start.

And the Nasdaq Composite’s near-term backdrop remains jagged.

Notable resistance holds at its breakdown point — spanning from 4,045 to 4,052 — and the index is retesting this area in Thursday’s early action.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has staged a shaky, but successful, test of support around the 4,000 mark.

Its first significant resistance spans from 4,082 (the early-December peak) to the 50-day moving average, currently 4,100.

Moving to the Dow, its six-month backdrop is the weakest.

Nonetheless, the index has reclaimed its 200-day moving average, currently 15,483, in Thursday’s early action, and a close at current levels could punctuate a potentially meaningful market low. (See the October retest of the 200-day.)

And the S&P 500’s backdrop highlights the headline technical issue.

Significant resistance holds around 1,775, and the response to this area should be a useful bull-bear gauge. While the index effectively held all-time highs as recently as Jan. 21, it hasn’t cleared meaningful resistance in about seven weeks.

The bigger picture

With Thursday’s strong start, the “expected” oversold rally attempt is underway.

The question now is whether it punctuates a meaningful market low, or conversely, registers as a weak corrective bounce.

Time will tell, though several metrics stand out as useful, and quantifiable, bull-bear gauges.

To start, a strong-volume reversal back atop the Dow’s 200-day moving average would strengthen the bull case, as detailed in Wednesday’s review.

The Dow’s 200-day currently rests at 15,483, and the index is trading about 100 points higher as this is written.

A close at current levels would raise the flag to fleeting shakeout, a la late-2012.

But perhaps more importantly, significant S&P 500 resistance falls out as follows:

  • S&P resistance at the absolute January low of 1,770.45.

  • Resistance at the January closing low of 1,774.20.

As this is written, the S&P has topped at 1,770.54 in Thursday’s early action.

Summing up the backdrop

All told, the major U.S. benchmarks are showing signs of life, though the quality of the rally attempt remains a question mark.

The monthly U.S. jobs report is due out Friday morning, and it’s typically the month’s most important economic data point. (See Economic Calendar.)

So collectively, the current backdrop is setting up for a clash between the technicals and the fundamental data.

Significant resistance holds at S&P 1,775, and its near-term path of least resistance points lower pending a close atop this area. (A break atop resistance immediately before the monthly jobs report would be unexpected.)

Thursday’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, the iShares MSCI Emerging Markets ETF
US:EEM
 has reached its latest technical test.

Namely, the group is retesting the August low, a level that formerly punctuated a steep one-month rally.

Against the backdrop, the group is near-term oversold, and due a corrective bounce, though its longer-term technical bias points lower. First resistance holds at the bottom of last month’s gap, around 38.80, and a close higher would mark an early step toward stabilization.

Juniper Networks, Inc.
US:JNPR
 is a large-cap name positioned to rise.

As illustrated the shares have recently staged consecutive gaps higher, fueled by reports of separate activist investor stakes in the company. (The second gap higher also followed the company’s quarterly results.)

The subsequent pullbacks have been flat — driven by lighter volume — with the most recent placing the shares at a high risk/reward entry near the 20-day moving average.

Initially profiled Nov. 8, Advanced Energy Industries, Inc.
US:AEIS
 has returned 12.3% and remains well positioned.

Consider that recent strength follows a successful test of first support, and has been driven by a volume spike, positioning the shares for a potential breakout.

Profiled Dec. 5, United Continental Holdings, Inc.
US:UAL
 has returned 16.1% and remains well positioned.

The shares initially spiked four weeks ago, fueled by the company’s strong December traffic results, and optimism that it will pay a dividend later this year.

By comparison, the ensuing pullback has been orderly, placing the shares at an attractive entry near gap support, and 12.8% under the January peak.

Lionbridge Technologies, Inc.
US:LIOX
 is a small-cap developer of technical platforms, including foreign-language versions of application software.

Earlier this week, the shares knifed to seven-year highs, rising on the company’s strong quarterly results.

Though still near-term extended, a deeper pullback toward the breakout point, around 6.30, would offer a high risk/reward entry.

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

Open Text Corp.

OTEX

Feb. 5

NextEra Energy, Inc.

NEE

Feb. 5

EQT Corp.

EQT

Feb. 5

Allot Communications, Ltd.

ALLT

Feb. 5

Qihoo 360 Technology Co.

QIHU

Feb. 3

Actavis plc

ACT

Feb. 3

Equinix, Inc.

EQIX

Feb. 3

Lennar Corp.

LEN

Feb. 3

Health Care Select Sector SPDR

XLV

Jan. 31

Southwestern Energy Co.

SWN

Jan. 31

QuickLogic Corp.

QUIK

Jan. 31

Salesforce.com, Inc.

CRM

Jan. 30

Aruba Networks, Inc.

ARUN

Jan. 30

Textron, Inc.

TXT

Jan. 30

SunTrust Banks, Inc.

STI

Jan. 29

TE Connectivity Ltd.

TEL

Jan. 29

PNC Financial Services Group

PNC

Jan. 28

Boston Scientific Corp.

BSX

Jan. 28

Solar City Corp.

SCTY

Jan. 28

Arrowhead Research Corp.

ARWR

Jan. 28

Synaptics, Inc.

SYNA

Jan. 27

Merck & Co.

MRK

Jan. 27

TD Ameritrade Holding Corp.

AMTD

Jan. 27

NetApp, Inc.

NTAP

Jan. 27

Marvell Technology Group

MRVL

Jan. 23

Raytheon Co.

RTN

Jan. 23

iShares Nasdaq Biotechnology ETF

IBB

Jan. 22

F5 Networks, Inc.

FFIV

Jan. 22

Barrick Gold Corp.

ABX

Jan. 21

Magna International, Inc.

MGA

Jan. 21

Athenahealth, Inc.

ATHN

Jan. 21

Gilead Sciences, Inc.

GILD

Jan. 17

Trinity Industries, Inc.

TRN

Jan. 17

Alliant Techsystems, Inc.

ATK

Jan. 17

Ventas, Inc.

VTR

Jan. 17

Mylan, Inc.

MYL

Jan. 16

Cray, Inc.

CRAY

Jan. 16

Valeant Pharmaceuticals, Inc.

VRX

Jan. 16

Atmel Corp.

ATML

Jan. 16

Yelp, Inc.

YELP

Jan. 13

Pan American Silver Corp.

PAAS

Jan. 13

Delta Air Lines, Inc.

DAL

Jan. 10

Workday, Inc.

WDAY

Jan. 10

ServiceNow, Inc.

NOW

Jan. 9

Palo Alto Networks, Inc.

PANW

Jan. 8

Brocade Communications Systems, Inc.

BRCD

Jan. 8

Eli Lilly & Co.

LLY

Jan. 7

Gramercy Property Trust, Inc.

GPT

Jan. 6

QuickLogic Corp.

QUIK

Jan. 6

Market Vectors Gold Miners ETF

GDX

Jan. 3

Silver Wheaton Corp.

SLW

Jan. 3

Hecla Mining Co.

HL

Jan. 2

Red Hat, Inc.

RHT

Dec. 31

Sangamo Biosciences, Inc.

SGMO

Dec. 31

Isis Pharmaceuticals, Inc.

ISIS

Dec. 23

SolarCity Corp.

SCTY

Dec. 20

CalAmp Corp.

CAMP

Dec. 20

NPS Pharmaceuticals, Inc.

NPSP

Dec. 19

Silver Standard Resources, Inc.

SSRI

Dec. 18

Himax Technologies, Inc.

HIMX

Dec. 17

Biogen Idec, Inc.

BIIB

Dec. 17

Time Warner Cable, Inc.

TWC

Dec. 17

Visa, Inc.

V

Dec. 16

Illumina, Inc.

ILMN

Dec. 16

Idera Pharmaceuticals, Inc.

IDRA

Dec. 16

Facebook, Inc.

FB

Dec. 13

Avago Technologies

AVGO

Dec. 11

Forest Laboratories, Inc.

FRX

Dec. 9

Energy Transfer Equity, L.P.

ETE

Dec. 9

Advance Auto Parts, Inc.

AAP

Dec. 6

Hewlett-Packard Co.

HPQ

Dec. 5

United Continental Holdings, Inc.

UAL

Dec. 5

DexCom, Inc.

DXCM

Dec. 4

Open Text Corp.

OTEX

Dec. 4

AOL, Inc.

AOL

Dec. 3

Blackstone Group

BX

Dec. 3

Dish Network Corp.

DISH

Nov. 27

Riverbed Technology, Inc.

RVBD

Nov. 27

Western Digital Corp.

WDC

Nov. 26

iShares Nasdaq Biotechnology ETF

IBB

Nov. 25

Salix Pharmaceuticals, Ltd.

SLXP

Nov. 25

General Dynamics Corp.

GD

Nov. 25

Jazz Pharmaceuticals

JAZZ

Nov. 21

JetBlue Airways Corp.

JBLU

Nov. 13

Advanced Energy Industries, Inc.

AEIS

Nov. 8

Electronics for Imaging, Inc.

EFII

Nov. 8

Microchip Technology, Inc.

MCHP

Nov. 7

Splunk, Inc.

SPLK

Nov. 5

Health Care Select Sector SPDR

XLV

Oct 31

Alaska Air Group, Inc.

ALK

Oct. 25

Check Point Software Technologies

CHKP

Oct. 23

Delta Air Lines, Inc.

DAL

Oct. 23

Infosys, Ltd.

INFY

Oct. 22

Google, Inc.

GOOG

Oct. 21

Spirit Airlines, Inc.

SAVE

Oct. 15

Adobe Systems, Inc.

ADBE

Oct. 10

Southwest Airlines Co.

LUV

Oct. 10

Agilent Technologies Inc.

A

Oct. 8

Micron Technology, Inc.

MU

Oct. 7

Autodesk, Inc.

ADSK

Oct. 3

PolyOne Corp.

POL

Oct. 1

Canadian Solar, Inc.

CSIQ

Sept. 26

Biogen Idec, Inc.

BIIB

Sept. 18

Harmon International Industries, Inc.

HAR

Sept. 16

E-Trade Financial Corp.

ETFC

Sept. 9

Vipshop Holdings Limited

VIPS

Sept. 3

Incyte Corp.

INCY

Aug. 8

Mylan, Inc.

MYL

May 23

x


View more information: https://www.marketwatch.com/story/market-bulls-show-signs-of-a-pulse-2014-02-06

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