Charts to Watch: SPX, JPM, CAT

Nicole (0:00)

Now it's time for Charts to Watch. Rachel Dashiell is with us, Head of Technical Research and Strategy at Schwab Center for Financial Research. And we've seen the S&P 500 trying to hold 7,700 today. It's down this week, today, but it's down four or five days with the down arrow again here.

Your thoughts on the levels that we're watching, because we're seeing some really pretty dramatic moves in the bond market and these yields. So it'll be interesting to hear the levels, particularly on a day like this. Rachel.

Rachel Dashiell (0:31)

Definitely, Nicole, great to join you. So the S&P right now is at support, couple levels of support. One would be this rising wedge that is forming, which is coming into confluence with that 50-day moving average that's really being tested today. Now, on the surface, things seem to be holding in, but there's definitely warning signs under the surface of the index. We did have a pretty big multi-month momentum divergence in price made these recent new all-time highs. There's also been breakdowns in tech relative to the S&P 500, same with high beta versus low volatility. Just looking at some of the risk relationships and rotation throughout this market.

Just because tech is so heavy and it is showing a little bit of relative weakness here, at least in the short term, we could see the index catch down to some of the weakness under the surface. The next level of support that technicians may be looking at is the 100-day moving average around 7,600 that aligns with former highs. I don't think that a test there within the next few sessions would be out of the question, since that is just a point and a half or 2 percent below. Then lastly, that average directional index, that trend strength gauge is sitting at a trough, signaling that whichever way the market breaks, it is about to accelerate in a trend direction here, Nicole.

Nicole (1:53)

All right. Very key, particularly for today. We'll watch some of those key support levels. What about JPMorgan Chase, the rare double miss on the numbers?

Jamie Dimon is always a little bit cautious in the first place, but these financials really did come under some pressure overall. What are your thoughts on the name like JPMorgan today and the technicals more importantly on this chart?

Rachel Dashiell (2:14)

Yes.

JPMorgan as well as financials have been moving inversely from interest rates. After a few days of trading of consolidation of those rates, rates do appear to maybe be catching a short-term low here and maybe possibly re-accelerating their trend to the upside. But if we look at the rolling one-month correlation of JPMorgan to 10-year rates, we can see it's a very strong negative correlation there. Then price-wise, price is forming this potential head and shoulders topping formation. That neckline support sits at a pretty critical level at the confluence of that anchored VWAT from yearly lows. In the 200-day moving average, sitting there right at the same level around 322 I'd say if this neckline does break, a potential measured move of this potential topping pattern could carry JPMorgan to yearly lows. But I do find it interesting that with this latest push to support momentum with the RSI is refusing to get oversold. I think that is notable here.

If the pattern can prove to fail here and really hold this confluence of support, it could be pretty constructed for the broader market.

Nicole (3:24)

Yeah. Look, I mean, as you noted, we're looking both sides. We are watching carefully. I mean, they always give bright spots too. They did talk about and used words like the current environment being robust and supportive. But just that worry going forward. Paul Tudor, for example, gave us some worries for 2027 He's worried about stocks in 2027 So we'll have to wait and see. What about Caterpillar under some pressure? What caught your eye?

Rachel Dashiell (3:49)

Yeah, Nicole, I think the main point remains if investors can filter out a lot of the noise and just kind of focus on the price. So from a technical perspective, you know, the industrial sector has had the highest correlation with the S&P 500 over time. So you know, historically, industrials as a group have been the bellwether of the markets and Caterpillar is a bellwether of industrials. It just broke this longer term support after a volatility squeeze. You can see the Bollinger Bandwidth expanding from some of the tiniest levels seen all year and it's lost its 200 day moving average on Monday, that measure of the long term trend. And then today you're seeing even more downside where it lost its anchored VWat from yearly lows today. So with these levels being broken, you know, 661 is going to be that next level of support to the downside here. And it looks like volatility is expanding to the downside. But I would say if these layers of support hold similar to what we saw in JPMorgan, that would be incredibly constructive for the broader market. Nicole.