Technical Analysis – US 500 cash index tries to find its footing
August 9, 2023 3:25 pm
The US 500 cash index is in the red again today as it is trying to find its footing now that the earnings reporting season is coming to an end. It feels like the bulls are taking a well-deserved breather after recording a massive 32% rally from mid-October 2023 and a 21% advance since the March 13, 2023 low. However, they appear to be on high alert to stop the current correction from snowballing and potentially ruining the recent bullish series of higher lows and higher highs.
In the meantime, most momentum indicators appear to have reset following the strong upleg during 2023. The Average Directional Movement Index (ADX) has been dropping steadily and it is currently trading a tad above its threshold. Similarly, the RSI is hovering around its midpoint. Crucially, the stochastic is moving aggressively lower, towards its oversold territory and building a good gap from its moving average. This is usually seen as a strong bearish signal but confirmation is needed from the US 500 index price action, so as to open the door to a sizeable pullback.
Should the bears decide to recoup part of their losses, they would like to push the US 500 index below both the 50-day simple moving average at 4,437 and the March 13, 2023 upward sloping trendline. If successful, they would then come up against a much tougher area. The 4,270-4,317 range is populated by the 61.8% Fibonacci retracement level of the January 4, 2022 – October 12, 2022 downtrend, the October 1, 2021 low and the 100-day simple moving average (SMA). Even lower, strong support is expected at the 4,106-4,184 region.
On the flip side, the bulls are formulating their next upleg. They appear determined to defend the 4,437 level and retest the 4,533-4,550 range, defined by the 78.6% Fibonacci retracement level and the September 3, 2021 high. They would then have the chance of recording a new 2023 high and test their luck at the March 29, 2022 high at 4,637.
To conclude, US 500 cash index bulls are taking a breather but remain on high alert, especially as the momentum indicators appear to fuel the bears’ appetite for a significant pullback.
The US 500 cash index is in the red again today as it is trying to find its footing now that the earnings reporting season is coming to an end. It feels like the bulls are taking a well-deserved breather after recording a massive 32% rally from mid-October 2023 and a 21% advance since the March 13, 2023 low. However, they appear to be on high alert to stop the current correction from snowballing and potentially ruining the recent bullish series of higher lows and higher highs.
In the meantime, most momentum indicators appear to have reset following the strong upleg during 2023. The Average Directional Movement Index (ADX) has been dropping steadily and it is currently trading a tad above its threshold. Similarly, the RSI is hovering around its midpoint. Crucially, the stochastic is moving aggressively lower, towards its oversold territory and building a good gap from its moving average. This is usually seen as a strong bearish signal but confirmation is needed from the US 500 index price action, so as to open the door to a sizeable pullback.
Should the bears decide to recoup part of their losses, they would like to push the US 500 index below both the 50-day simple moving average at 4,437 and the March 13, 2023 upward sloping trendline. If successful, they would then come up against a much tougher area. The 4,270-4,317 range is populated by the 61.8% Fibonacci retracement level of the January 4, 2022 – October 12, 2022 downtrend, the October 1, 2021 low and the 100-day simple moving average (SMA). Even lower, strong support is expected at the 4,106-4,184 region.
On the flip side, the bulls are formulating their next upleg. They appear determined to defend the 4,437 level and retest the 4,533-4,550 range, defined by the 78.6% Fibonacci retracement level and the September 3, 2021 high. They would then have the chance of recording a new 2023 high and test their luck at the March 29, 2022 high at 4,637.
To conclude, US 500 cash index bulls are taking a breather but remain on high alert, especially as the momentum indicators appear to fuel the bears’ appetite for a significant pullback.
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