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