Technical Analysis – US 500 cash index rally continues; a correction is long overdue
July 18, 2023 7:27 am
The US 500 cash index continues its advance, and it is currently trading at the highest level since April 6, 2022. The move since the March 13, 2023 low has been exponential with the lack of significant corrections being very visible at this stage. The index is currently hovering below the busy 4,533-4,550 area, as the bulls appear keen to record another 2023 high.
In the meantime, while the momentum indicators are clearly on the bulls’ camp, there are some early signs of rally exhaustion manifesting. More specifically, both the RSI and the stochastic oscillator continue to support the current upleg. However, both these indicators are unable to register higher highs and thus opening the door to the much-expected correction. Crucially, the Average Directional Movement Index (ADX) seems unimpressed by the current US 500 index upleg as it trades just a tad above the 25-level threshold.
Should the move higher have legs, the initial target would probably be the 4,533-4,550 area that is defined by the 78.6% Fibonacci retracement level of the January 4, 2022 – October 12, 2022 downtrend and the September 3, 2021 high. Higher, the March 29, 2022 high is unlikely to trouble the bulls’ much as they set their eyes at the all-time high of 4,818.
On the flip side, the bears are anxiously trying to stage a small pullback. They would be keen on a move towards the March 13, 2023 upward sloping trendline and the 4,270-4,317 range respectively. The latter is populated by the 61.8% Fibonacci retracement, the October 1, 2021 low and the 50-day simple moving average (SMA). If successful, the bears could have a go at the 4,106-4,184 range, a key level from a sentiment-perspective.
To conclude, with the US 500 cash index rally continuing unabated, the bears are trying to muster up the courage and sufficient evidence from the momentum indicators to finally stage a decent correction.
The US 500 cash index continues its advance, and it is currently trading at the highest level since April 6, 2022. The move since the March 13, 2023 low has been exponential with the lack of significant corrections being very visible at this stage. The index is currently hovering below the busy 4,533-4,550 area, as the bulls appear keen to record another 2023 high.
In the meantime, while the momentum indicators are clearly on the bulls’ camp, there are some early signs of rally exhaustion manifesting. More specifically, both the RSI and the stochastic oscillator continue to support the current upleg. However, both these indicators are unable to register higher highs and thus opening the door to the much-expected correction. Crucially, the Average Directional Movement Index (ADX) seems unimpressed by the current US 500 index upleg as it trades just a tad above the 25-level threshold.
Should the move higher have legs, the initial target would probably be the 4,533-4,550 area that is defined by the 78.6% Fibonacci retracement level of the January 4, 2022 – October 12, 2022 downtrend and the September 3, 2021 high. Higher, the March 29, 2022 high is unlikely to trouble the bulls’ much as they set their eyes at the all-time high of 4,818.
On the flip side, the bears are anxiously trying to stage a small pullback. They would be keen on a move towards the March 13, 2023 upward sloping trendline and the 4,270-4,317 range respectively. The latter is populated by the 61.8% Fibonacci retracement, the October 1, 2021 low and the 50-day simple moving average (SMA). If successful, the bears could have a go at the 4,106-4,184 range, a key level from a sentiment-perspective.
To conclude, with the US 500 cash index rally continuing unabated, the bears are trying to muster up the courage and sufficient evidence from the momentum indicators to finally stage a decent correction.
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