Bullish momentum persists, S&P 500 extends February breakout

 marketwatch.com  02/08/2021 17:03:37   Michael Ashbaugh

U.S. stocks are higher early Monday, rising as February bullish momentum persists.

In the process, the S&P 500 and Nasdaq Composite have extended respectable breaks to record territory, while the Dow Jones Industrial Average has belatedly broken out, tagging its latest record high Monday.

Before detailing the U.S. markets wider view, the S&P 500s US:SPX hourly chart highlights the past two weeks.

As illustrated, the S&P has cleared its range top, breaking to record highs. The index has ventured slightly atop the 3,900 mark early Monday for the first time on record.

Tactically, the breakout point (3,870) pivots to first support. Delving deeper, the 3,830 area remains an inflection point.

Meanwhile, the Dow Jones Industrial Average US:DJIA is challenging record territory.

In fact, the index has surpassed its record close (31,188.38) and absolute record peak (31,272.22) early Monday. The blue-chip benchmark is vying to register its latest record close.

More broadly, the prevailing upturn punctuates a V-shaped reversal underpinned by major support (29,964) also detailed on the daily chart.

Against this backdrop, the Nasdaq Composite US:COMP has extended its break to record highs.

Recent follow-through punctuates a V-shaped reversal originating from major support (12,973) also illustrated below.

Tactically, the breakout point (13,730) pivots to first support.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its uptrend, tagging previously uncharted territory.

Consider that the marquee 14,000 mark is firmly within view to start this week. The Nasdaq is vying Monday to register a swift rally from 13,000 to 14,000  about a 7.7% span  across just seven sessions.

Recall that a near-term target projects to the 14,200 area.

More broadly, the prevailing upturn originates from support matching the 2020 peak (12,973), detailed repeatedly. The late-January low (12,985) registered about 12 points above support.

Looking elsewhere, the Dow Jones Industrial Average is challenging all-time highs.

Against this backdrop, the blue-chip benchmark has surpassed its record close (31,188.38) and absolute record peak (31,272.22) early Monday.

The prevailing upturn originates from last-ditch support (29,964)  detailed previously  placing the index firmly atop its former breakdown point (30,283), also illustrated on the hourly chart.

A breakout attempt is currently underway.

Meanwhile, the S&P 500 has extended a respectable  though not off-the-charts aggressive  technical breakout.

Here again, the prevailing upturn punctuates a V-shaped reversal from major support. The January close registered within two points of the 50-day moving average to precede a strong February start.

The bigger picture

As detailed above, the major U.S. benchmarks are acting well technically.

On a headline basis, the S&P 500 and Nasdaq Composite have extended respectable February breakouts, while the still lagging Dow industrials have belatedly tagged record highs early Monday.

Amid the slightly uneven price action, each benchmarks intermediate-term bias remains comfortably bullish.

Moving to the small-caps, the iShares Russell 2000 ETF US:IWM has knifed to previously uncharted territory.

The prevailing upturn marks a two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands.

Though near-term extended, and due to consolidate, the statistically unusual bullish momentum improves the chances of longer-term follow-through. (As reference, see the equally powerful November and January breakouts, followed by flattish pullbacks, and upside follow-through)

The Russell 2000 has registered the strongest breakout of the widely-tracked U.S. benchmarks.

Meanwhile, the SPDR S&P MidCap 400 ETF US:MDY is vying to reach record territory.

Last weeks close marked a nominal record close, and the MDY has followed through early Monday to register its latest absolute record peak.

Recall the prevailing upturn originates from the breakout point (425.30).

Looking elsewhere, the SPDR Trust S&P 500 US:SPY has extended a modest breakout.

Though the upturn has been fueled by lackluster volume, the SPYs consecutive record highs punctuate a still comfortably bullish backdrop.

Placing a finer point on the S&P 500, the index has tagged consecutive record highs, and is vying Monday to register its third straight record close.

To reiterate, the breakout point (3,870) pivots to first support.

More broadly, the prevailing upturn punctuates a bullish V-shaped reversal from major support.

The specific area matches the late-December breakout point (3,823) and the 50-day moving average.

As detailed previously, a near-term target projects from the S&Ps late-January range to the 4,010 area, about 3.2% above current levels. The S&P has ventured atop the 3,900 mark early Monday for the first time on record.

Beyond specific levels, the February breakouts dovetail with a still constructive sub-sector backdrop, and a reasonably bullish backdrop as it applies to the internals. The S&P 500s intermediate-term path of least resistance continues to point higher.

Mondays 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 U.S. Home Construction ETF US:ITB is acting well technically.

As illustrated, the group has rallied to challenge all-time highs, tagging a nominal record close.

More immediately, the group has broken out more decisively early Monday. A near-term target projects to the 67.00 area on follow-through.

Conversely, the former range top, circa 60.00, is followed by the deeper breakout point (58.20). The groups prevailing rally attempt is firmly-intact barring a violation.

Moving to specific names, Nike, Inc. US:NKE is a Dow 30 component coming to life.

Technically, the shares have rallied toward the range top, rising within striking distance of record territory. (Last weeks close marked the third-best close on record.)

The prevailing upturn originates from support closely matching the 100-day moving average. Tactically, the pending retest of the range top is worth tracking. An intermediate-term target projects to the 163 area on follow-through.

Conversely, near-term support, circa 139.00, closely matches the 50-day moving average. A breakout attempt is in play barring a violation.

Initially profiled April 24, Chewy, Inc. US:CHWY has returned 151.4% and remains well positioned.

The shares initially spiked about three weeks ago, reaching record highs on increased volume.

By comparison, the subsequent pullback has been flat, positioning the shares to build on the steep December and January rallies.

Tactically, the 50-day moving average has marked an inflection point and is rising toward support closely matching the 100 mark. A sustained posture higher signals a firmly-bullish bias.

Public since April 2019, Beyond Meat, Inc. US:BYND is a large-cap developer of plant-based meat products.

Late last month, the shares gapped sharply higher, tagging 18-month highs after the company announced a partnership with PepsiCo to develop plant-based snack products.

The ensuing pullback has been fueled by decreased volume, placing the shares 13.7% under the January closing peak.

Tactically, gap support (164.25) roughly matches the post-breakout low (163.02). The recovery attempt is intact barring a violation.

Finally, Lennar Corp. US:LEN is a well positioned large-cap homebuilder.

As illustrated, the shares have knifed to record territory, rising from the breakout point (81.50) on increased volume.

Underlying the upturn, its relative strength index (not illustrated) has registered 52-week highs, improving the chances of longer-term follow-through.

Tactically, a near-term floor (87.40) is followed by the former range top, circa 85.00. A sustained posture atop this area signals a comfortably bullish bias.

(On a granular note, Lennar Corp. is the ITBs second-largest component, accounting for about a 12.5% sector weighting. The tandem backdrops have recently tracked quite closely)

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
Cisco Systems, Inc. CSCO Feb. 5
KeyCorp KEY Feb. 5
Datadog, Inc. DDOG Feb. 5
Appian Corp. APPN Feb. 4
Diamondback Energy, Inc. FANG Feb. 4
Gogo, Inc. GOGO Feb. 4
Wix.com, Ltd. WIX Feb. 3
CarMax, Inc. KMX Feb. 3
Sierra Wireless SWIR Feb. 3
Toll Brothers, Inc. TOL Feb. 2
Eagle Materials, Inc. EXP Feb. 2
Avis Budget Group, Inc. CAR Feb. 1
Capital One Financial Corp. COF Jan. 29
NetApp, Inc. NTAP Jan. 29
Aptiv, plc APTV Jan. 29
Rio Tinto Group RIO Jan. 26
Sorrento Therapeutics, Inc. SRNE Jan. 26
Netflix, Inc. NFLX Jan. 25
Cummins, Inc. CMI Jan. 25
Invesco Solar ETF TAN Jan. 22
Magna International, Inc. MGA Jan. 22
M.D.C. Holdings, Inc. MDC Jan. 22
Zebra Technologies Corp. ZBRA Jan. 14
Chegg, Inc. CHGG Jan. 11
Macys, Inc. M Jan. 11
Nexstar Media Group, Inc. NXST Jan. 11
iShares Transportation Average ETF IYT Jan. 11
Energy Select Sector SPDR XLE Jan. 8
Teledoc Health, Inc. TDOC Jan. 8
Skyworks Solutions, Inc. SWKS Jan. 7
Financial Select Sector SPDR XLF Jan. 7
Synaptics, Inc. SYNA Jan. 4
Sunrun, Inc. RUN Dec. 23
ShockWave Medical, Inc. SWAV Dec. 23
JPMorgan Chase & Co. JPM Dec. 22
Ballard Power Systems, Inc. BLDP Dec. 21
LivePerson, Inc. LPSN Dec. 21
United Therapeutics Corp. UTHR Dec. 21
Shopify, Inc. SHOP Dec. 18
CyberArk Software Ltd. CYBR Dec. 18
Calix, Inc. CALX Dec. 17
Elastic N.V. ESTC Dec. 17
Cerner Corp. CERN Dec. 17
Tenet Healthcare Corp. THC Dec. 16
Williams-Sonoma, Inc. WSM Dec. 15
iShares Nasdaq Biotechnology ETF IBB Dec. 15
SDPR S&P Regional Banking ETF KRE Dec. 14
Etsy, Inc. ETSY Dec. 14
Plug Power, Inc. PLUG Dec. 9
F5 Networks, Inc. FFIV Dec. 8
Emerson Electric Co. EMR Dec. 8
Zscaler, Inc. ZS Dec. 7
Fortinet, Inc. FTNT Dec. 7
Kulicke and Soffa Industries, Inc. KLIC Dec. 7
Dillards, Inc. DDS Dec. 4
Spotify Technology S.A. SPOT Dec. 3
Valero Energy Corp. VLO Dec. 3
Analog Devices, Inc. ADI Dec. 2
Sonos, Inc. SONO Dec. 1
American Airlines Group, Inc. AAL Nov. 30
Zillow Group, Inc. ZG Nov. 23
Bank of America Corp. BAC Nov. 20
SPDR S&P Oil & Gas Exploration and Production ETF XOP Nov. 20
MetLife, Inc. MET Nov. 19
Kohls Corp. KSS Nov. 18
Applied Materials, Inc. AMAT Nov. 17
RingCentral, Inc. RNG Nov. 13
Regions Financial Corp. RF Nov. 13
Snap, Inc. SNAP Nov. 9
Norfolk Southern Corp. NSC Nov. 9
Communications Services Select Sector SPDR XLC Nov. 5
Health Care Select Sector SPDR XLV Nov. 5
Alphabet, Inc. GOOGL Nov. 5
Keysight Technologies, Inc. KEYS Nov. 4
8x8, 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
The Travelers Companies, Inc. TRV Oct. 21
Micron Technology, Inc. MU Oct. 20
Vulcan Materials Co. VMC Oct. 19
ON Semiconductor Corp. ON Oct. 16
Ford Motor Co. F Oct. 15
First Solar, Inc. FSLR Oct. 13
SPDR S&P Homebuilders ETF XHB Oct. 9
Shake Shack, Inc. SHAK Oct. 9
SPDR S&P Biotech ETF XBI Oct. 8
Twilio, Inc. TWLO Oct. 8
Cloudflare, Inc. NET Oct. 7
SailPoint Technology Holdings, Inc. SAIL Oct. 1
Martin Marietta Materials, Inc. MLM Sept. 30
Abercrombie & Fitch Co. ANF Sept. 29
Zendesk, Inc. ZEN 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
Deere & Co. DE Aug. 24
Johnson Controls International JCI Aug. 21
Canadian Solar, Inc. CSIQ Aug. 20
General Motors Co. GM Aug. 20
Builders FirstSource, Inc. BLDR Aug. 18
Enphase Energy, Inc. ENPH Aug. 13
Freeport McMoRan, Inc. FCX Aug. 10
Industrial Select Sector SPDR XLI Aug. 6
Penn National Gaming, Inc. PENN July 30
SPDR S&P Metals & Mining ETF XME July 28
iShares MSCI South Korea ETF EWY July 28
Advanced Micro Devices, Inc. AMD July 23
Materials Select Sector SPDR XLB July 20
Caterpillar, Inc. CAT July 20
Roku, Inc. ROKU July 16
Consumer Discretionary Select Sector SPDR XLY July 13
SunPower Corp. SPWR July 13
Danaher Corp. DHR June 24
Fiverr International, Ltd. FVRR June 19
Square, Inc. SQ June 8
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
Five9, Inc. FIVN Apr. 24
Chewy, Inc. CHWY Apr. 24
Tesla, Inc. TSLA Apr. 23
VanEck Vectors Semiconductor ETF SMH Apr. 17
Okta, Inc. OKTA Apr. 16
Target Corp. TGT Apr. 16
Invesco QQQ Trust QQQ Apr. 14
Apple, Inc. AAPL Mar. 27
iShares MSCI Emerging Markets ETF EEM Mar. 19
Microsoft Corp. MSFT Feb. 22
* Click each symbol for current chart.
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