S&P 500 ventures atop major resistance, slow-motion breakout attempt underway

Technically speaking, the backdrop for U.S. stocks has strengthened amid a grinding-higher July rally.

Consider that the Nasdaq Composite has reached record territory — and is digesting a slight breakout — while the S&P 500 concurrently challenges major resistance matching a five-month range top (2,802). The charts below add color:

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.38% hourly chart highlights the past two weeks.

As illustrated, the S&P’s slow-motion breakout attempt remains underway.

Major overhead matches a five-month range top (2,802) and the recent selling pressure in this area has registered as flat. Last week’s close (2,801) matched resistance, and the S&P has ventured fractionally higher early Tuesday.

Meanwhile, the Dow Jones Industrial Average has narrowly extended its July rally.

In the process, the blue-chip benchmark has ventured atop the 25,000 mark, notching consecutive closes nominally higher.

The prevailing upturn punctuates a successful test of the 50-day moving average.

Against this backdrop, the Nasdaq Composite is digesting a modest break to record territory.

Tactically, first support matches the June peak (7,806) — better illustrated below — and is followed by the near-term breakout point (7,777).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has sustained a modest mid-July breakout. Monday’s close (7,805.7) matched first support at the June peak (7,806.6).

Though near-term extended — and a consolidation phase seems to be underway — a near- to intermediate-term target projects from the June low to the 8,170 area.

Looking elsewhere, the Dow industrials’ backdrop remains comparably jagged.

Nonetheless, the blue-chip benchmark has edged atop the 25,000 mark, also placing distance atop the 50- and 200-day moving averages.

To reiterate, more distant inflection points match the June closing peak (25,322) and the absolute June peak (25,402).

Meanwhile, the S&P 500 has effectively nailed major overhead.

The recent muted selling pressure near resistance (2,802) improves the chances of eventual follow-through.

Broadly speaking, an already-bullish technical backdrop has strengthened to start the third quarter.

On a headline basis, the Nasdaq Composite is digesting a break to record territory, the S&P 500 has nailed major resistance, and the still lagging behind Dow industrials have nonetheless cleared several key technical levels.

Moving to the small-caps, the iShares Russell 2000 ETF is consolidating just under all-time highs.

The July peak registered fractionally below record territory and the prevailing pullback remains shallow. To reiterate, its record close (169.97) and absolute record peak (170.20) remain within striking distance.

Meanwhile, the S&P MidCap 400’s July peak marked a fractional record.

Here again, the current pullback from the range top has been flat, fueled by decreased volume. Constructive price action.

Looking elsewhere, the SPDR Trust S&P 500 is challenging the June peak (279.48).

The SPY has notched three straight closes within a fraction of resistance, and its persistence near the range top is constructive.

Similarly, the S&P 500’s backdrop is increasingly straightforward.

To reiterate, the S&P is challenging familiar overhead matching the March peak (2,802). Recent selling pressure near resistance has been muted, improving the chances of eventual follow-through.

Separately, recall major resistance is frequently cleared on the third or fourth independent retest. The prevailing breakout attempt marks the third approach.

On further strength, additional overhead matches the January gap, an area broadly spanning from 2,838 to 2,851. This is followed by the S&P 500’s absolute record high (2,872.9), established Jan. 26, a level also precisely matching its record close.

Slightly more broadly, an intermediate-term target projects from the June low to the 2,890 area.

Beyond specific levels, the prevailing backdrop remains uneven — not one-size-fits-all — though on balance the market technicals support a comfortably bullish intermediate- to longer-term bias.

See also: Charting a bullish Q3 start, S&P 500 challenges major resistance.

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 United States Oil Fund USO, +0.21% has extended its July downturn. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

The shares initially turned lower last week, pressured amid concerns over increased Libyan production after the country lifted restrictions on its oil ports.

The downturn has accelerated this week, fueled by reports that Saudi Arabia may increase production, and that the U.S. may consider tapping its strategic petroleum reserve.

Technically, the shares have violated trendline support and the 50-day moving average, placing the intermediate-term trend in doubt. A swift reversal atop the 14.30-to-14.40 area would place the brakes on bearish momentum.

Delving deeper, a near-term floor (13.60) is followed by important support matching the June low (13.00). The USO’s longer-term bias remains bullish barring a violation.

Moving to U.S. sectors, the SPDR S&P Retail ETF XRT, +0.78% is acting well technically.

As illustrated, the group is digesting the steep early-June rally, maintaining support at the breakout point.

More broadly, the group is well positioned on the 10-year chart, poised to challenge record territory matching the 2015 peak (51.25). An eventual close higher opens the path to uncharted territory and potentially material follow-through.

Tactically, the ascending 50-day moving average has marked an inflection point, currently 48.20, and a posture higher supports a bullish bias.

Five Below, Inc. FIVE, -0.93% is a well positioned large-cap specialty retailer.

The shares initially spiked five weeks ago, gapping to record territory after the company’s strong first-quarter results.

The subsequent pullback has been flat — underpinned by the top of the gap — positioning the shares to build on the June spike.

More immediately, Monday’s close marked a fractional record, opening the path to a potentially more decisive breakout. A near-term target projects to the 106 area on follow-through.

NetEase, Inc. NTES, -0.06% is a large-cap Beijing-based Internet name showing signs of life.

Technically, the shares have established a tight one-week range, challenging resistance closely matching the 100-day moving average.

Underlying the upturn, its relative strength index (not illustrated) has recently notched a year-to-date peak, improving the chances of eventual follow-through. Tactically, a near-term floor matches last week’s low (259.00) and a breakout attempt is in play barring a violation.

Initially profiled April 19, Applied Optoelectronics, Inc. AAOI, +0.43% has returned 53.8% and remains well positioned.

The shares concluded May with a strong-volume breakout, knifing atop the 200-day moving average after a positive analyst research note.

More immediately, the tight July range signals muted selling pressure near resistance, positioning the shares to build on the steep May rally. A breakout attempt is in play barring a violation of near-term support, circa 47.00.

The table below includes names recently profiled in The Technical Indicator that remain well positioned. For the original comments, see The Technical Indicator Library.

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