Technical Analysis – US 100 cash index edges below the 2023 high but correction could have legs
May 24, 2023 8:27 am
The US 100 index is edging lower after reaching the 2023 high of 13,924. It has been an eventful year up to now with this index managing to overcome the mid-March rout caused by banking sector issues. Actually, since the October 13, 2022 low of 10,431, the US 100 index has been on an upwards path recording a series of higher highs and higher lows.
The latest upleg enjoyed the support of the momentum indicators but the picture is more mixed now. The Average Directional Movement Index (ADX) is moving sideways, potentially signalling a change in the recent bullish trend. This means that the US 100 index could consolidate at current levels or a new bearish trend could take hold soon.
The stochastic oscillator is close to confirming this trend change. It is hovering inside its overbought area (OB) but it has just broken below its moving average (MA). A further move below the OB territory would act as confirmation of a bearish breakout.
Should the bears feel encouraged by these signals, they would try to clear the busy 13,600-13,721 range. The next support would then come at the 13,098-13,206 area set by the August 26, 2022 high and the 50-day simple moving average (SMA). Even lower, the busy 12,858-12,888 area defined by the 38.2% Fibonacci retracement level of the November 22, 2021 – October 13, 2022 downtrend, the September 13, 2022 high and the 50-day simple moving average (SMA) could prove tougher to crack.
On the other hand, if the bulls remain committed to making higher highs, they would try to push the US 100 index above the 13,600-13,721 area. This is populated by the August 16, 2022 high and the 50% Fibonacci retracement. Even higher, the April 29, 2021 high of 14,075 looks critical from a long-term perspective.
To sum up, the current pullback seems to be the least of the bulls’ worries as the overall technical picture is ready to turn bearish.
The US 100 index is edging lower after reaching the 2023 high of 13,924. It has been an eventful year up to now with this index managing to overcome the mid-March rout caused by banking sector issues. Actually, since the October 13, 2022 low of 10,431, the US 100 index has been on an upwards path recording a series of higher highs and higher lows.
The latest upleg enjoyed the support of the momentum indicators but the picture is more mixed now. The Average Directional Movement Index (ADX) is moving sideways, potentially signalling a change in the recent bullish trend. This means that the US 100 index could consolidate at current levels or a new bearish trend could take hold soon.
The stochastic oscillator is close to confirming this trend change. It is hovering inside its overbought area (OB) but it has just broken below its moving average (MA). A further move below the OB territory would act as confirmation of a bearish breakout.
Should the bears feel encouraged by these signals, they would try to clear the busy 13,600-13,721 range. The next support would then come at the 13,098-13,206 area set by the August 26, 2022 high and the 50-day simple moving average (SMA). Even lower, the busy 12,858-12,888 area defined by the 38.2% Fibonacci retracement level of the November 22, 2021 – October 13, 2022 downtrend, the September 13, 2022 high and the 50-day simple moving average (SMA) could prove tougher to crack.
On the other hand, if the bulls remain committed to making higher highs, they would try to push the US 100 index above the 13,600-13,721 area. This is populated by the August 16, 2022 high and the 50% Fibonacci retracement. Even higher, the April 29, 2021 high of 14,075 looks critical from a long-term perspective.
To sum up, the current pullback seems to be the least of the bulls’ worries as the overall technical picture is ready to turn bearish.
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