Nasdaq being tested in bull-bear battleground

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CINCINNATI (MarketWatch) � While the major U.S. benchmarks trend higher, the Nasdaq has reached a significant technical test.

The specific level holds at the 2012 peak � Nasdaq 3,197 � and for the near term, this area marks the bull/bear battleground.

The S&P 500�s hourly chart over the past two weeks shows the index has edged to yet another five-year high.

Initial support continues to hold at its breakout point of 1,515.

Meanwhile, the Dow industrials� near-term backdrop is slightly weaker.

The blue-chip benchmark is traversing a two-week range.

From current levels, initial resistance holds at last week�s high of 14,022, while notable support rests at the range bottom, around Dow 13,860.

And the Nasdaq has rallied to a significant technical test.

Specifically, major resistance holds at the 2012 peak of 3,197, better illustrated below.

Widening the view to six months adds perspective.

On this wider view, two technical areas stand out:

• Nasdaq resistance at the 2012 peak of 3,196.93.

• Last week�s high � Nasdaq 3,196.89.

More plainly, the Nasdaq tagged its 12-year high last week � almost to the decimal � and has initially balked at the resistance point.

Moving to the Dow, its six-month backdrop remains stronger.

Specifically, the blue-chip benchmark has sustained the 2013 breakout, establishing a two-week bullish flag.

Its tight range suggests that selling pressure remains limited, keeping market bulls on offense.

Meanwhile, the S&P 500 continues to trend above its 20-day moving average � currently 1,498 � and its path of least resistance points higher barring a violation of this area.

The bigger picture

As detailed above, the major U.S. benchmarks are holding a strong uptrend.

To start, the S&P 500 Index and the Dow Jones Industrial Average have sustained a break to five-year highs.

And at the same time, the Russell 2000 Index and S&P MidCap 400 Index are holding all-time highs.

Against this backdrop, the Nasdaq Composite has reached the U.S. markets� headline technical test.

As detailed previously, two technical areas stand out:

• Nasdaq resistance at the 2012 peak of 3,196.93.

• Last week�s high � Nasdaq 3,196.89.

To the extent that the Nasdaq holds tightly to resistance, the chances of a breakout improve.

And widening the view to 25 years, the Nasdaq�s monthly chart adds perspective. Each bar on the chart above represents one month.

Consider that a break from the 2012 peak would place the index in less-charted territory and its next technical resistance is poorly defined.

That�s bullish.

Separately, a breakout would mark an extension from a loosely drawn trend line originating at the Nasdaq�s 1987 low.