Charting the S&P 500’s bullish spike atop the 20-day volatility bands

  • Written by MarketWatch
  • Published in Economics

Several widely-tracked U.S. benchmarks have staged statistically unusual June breakouts, strengthening an already-bullish technical backdrop ahead of the Federal Reserve’s expected mid-week interest-rate hike.

Against this backdrop, the S&P 500 has extended its June rally — edging atop the 2,780 resistance — while the Nasdaq Composite is concurrently vying for its latest record close. ...

image image Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.18%[1]  hourly chart highlights the past two weeks. As illustrated, the S&P has extended the June breakout. Tactically, the 2,780 area remains an inflection point, matching consecutive session highs and Monday’s session low. Delving deeper, a firmer floor matches the May peak (2,742). image Similarly, the Dow Jones Industrial Average has broken out. In its case, an inflection point rests at 25,326, closely matching consecutive session highs, and Monday’s close (25,322). Conversely, the May peak (25,086) marks near-term support and is followed by a significant floor matching the 2017 peak (24,876). image Meanwhile, the Nasdaq Composite has pulled in modestly from record territory. Tactically, the breakout point (7,637) matches the March peak, and is closely followed by an inflection point just under the 7,600 mark. Conversely, the Nasdaq’s record high (7,697) is once again under siege early Tuesday. image Widening the view to six months, the Nasdaq’s daily chart includes its 20-day Bollinger bands, also known as volatility bands. Illustrated in red, the bands encompass two standard deviations of the Nasdaq’s trailing 20-day volatility. Consider that consecutive closes atop the bands signal a tension between two time horizons. For the near-term, the index is overbought, and due to consolidate. The breakout has been statistically unusual, placing it outside the trailing two standard deviation range. But more importantly, the underlying bullish momentum has registered as extreme, and likely lays the groundwork for longer-term upside follow-through. The Nasdaq’s initial June breakout encompassed four consecutive closes atop the bands, the month’s first four sessions. Distinctly bullish price action. By comparison, the subsequent pullback has been flat — illustrated on the hourly chart — likely positioning the index for incremental follow-through. image Looking elsewhere, the Dow Jones Industrial Average has extended its June breakout. The blue-chip benchmark is playing catch up, after lagging behind until last Wednesday. More broadly, the Dow is rising from a modified double bottom defined by the March and May lows. An intermediate-term target projects to the 26,200 area, initially detailed last week. (Start with the April

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