The Technical Indicator: Nasdaq sustains break to 11-year highs
CINCINNATI (MarketWatch) â After breaking out last week, the âexpectedâ selling pressure has been conspicuously absent.
http://www.marketwatch.com/story/na...11-year-highs-2012-02-07-1131190?pagenumber=1
Against this backdrop, each major U.S. benchmark has confirmed its uptrend, and the incremental upside from current levels could be meaningful. The charts below add color:
The S&P 500âs hourly chart details the past two weeks.
The S&P has sustained a break to six-month highs.
From current levels, initial support rests at its breakout point of 1,333, and is followed by a more significant floor at 1,322, better illustrated on the daily chart.
Conversely, initial resistance holds at 1,345, matching this weekâs high and the late-July peak.
Meanwhile, the Dow industrialsâ near-term backdrop is similar.
In its case, the blue-chip benchmark briefly touched a three-year closing high last week.
But practically speaking, itâs challenging resistance at the January peak of 12,842.
And the Nasdaq Composite remains the current market leader.
Consider that itâs gapped to 11-year highs, sustaining the breakout across two sessions.
Looking ahead, initial support holds at 2,885 â matching the top of last weekâs gap â and is followed by a deeper floor at 2,868.
Widening the view to six months adds perspective.
The Nasdaq remains near-term overbought following last weekâs spike to 11-year highs.
While its steep 2012 rally is longer-term bullish, a consolidation phase is likely in order.
From current levels, initial support spans from 2,868 to 2,885 â illustrated on the hourly chart â and is followed by a deeper floor at the January peak of 2,834.
Moving to the Dow, the blue-chip benchmark has also broken out.
On this wider view, initial resistance spans from 12,870 to 12,876 matching the 2011 peak.
Conversely, first support holds at its breakout point, around the July high of 12,753.
And the S&P 500 has also cleared significant resistance.
Namely, the index has knifed from trendline resistance, notching two straight closes at 1,344.
This level matches its next significant overhead â the July 2011 peaks â spanning from 1,345 to 1,356.
The bigger picture
As outlined above, the U.S. markets have confirmed their uptrend.
In fact, each major benchmark has cleared significant resistance as follows:
* The Nasdaq Composite has knifed to 11-year highs. Its former one-decade range top held at 2,887, matching gap support on the hourly chart.
* The Dow Jones Industrial Average has notched a three-year closing high. Its former three-year closing peak held at 12,810.
* The S&P 500 has cleared trendline resistance. Its first notable support now holds around 1,322 â matching the trendline â and a breakout point on the hourly chart.
Against this backdrop, the Nasdaq Compositeâs breakout is the most technically notable.
The Nasdaqâs monthly chart â spanning 25 years â makes the point.
Four inflection points stand out:
* The 2011 peak of 2,887 matching gap support on the hourly chart.
* The 2001 peak of 2,892.
* The December 2000 peak of 3,028.
* Resistance at 3,120, matching a 50% retracement of the dotcom bust.
So roughly speaking, initial Nasdaq support spans from 2,887 to 2,892, bracketing the 2001 and 2011 peaks.
And on a sustained break higher, the incremental upside could be significant.
Consider that an intermediate- to longer-term Nasdaq target rests at 3,120, matching a 50% retracement of the Internet crash.
This target holds about 7.7% above current levels.
Summing up the backdrop
All told, the U.S. markets are near-term extended, and a consolidation phase is underway.
But more importantly, the major benchmarks remain within a strong uptrend, and this is a market to buy on pullbacks to support.
The S&P 500âs first significant floor holds at 1,322, and should be a useful bull/bear gauge.
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