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

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.

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

Before detailing the U.S. markets’ wider view, the S&P 500’s
SPX,
-0.18%
 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.

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

Similarly, the Dow Jones Industrial Average
DJIA,
+0.52%
 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.

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

Against this backdrop, the Nasdaq Composite
COMP,
-0.97%
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).)

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

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.

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

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.

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

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.

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

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.

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

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.

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

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).

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

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.

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

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.

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

To start, the Industrial Select Sector SPDR
XLI,
+1.49%
 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.

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

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

Looking elsewhere, the Financial Select Sector SPDR
XLF,
+0.14%
 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).

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

Similarly, the SPDR S&P Regional Banking ETF
KRE,
+1.38%
 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
Charting market rotation: S&P 500, Dow industrials challenge record highs

Looking elsewhere, the iShares Transportation Average ETF
IYT,
+1.14%
 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.

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

Drilling down within the transportation sector, the U.S. Global Jets ETF
JETS,
-1.60%
 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
Charting market rotation: S&P 500, Dow industrials challenge record highs

Finally, the PowerShares QQQ Trust
QQQ,
-1.30%
 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.

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.

 

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