Technical Analysis – US 500 stock index eases from 14-month high, looks overbought
June 19, 2023 3:27 pm
The US 500 stock index (cash) is pulling back slightly from Friday’s highs when it briefly hit a 14-month peak of 4,446.77. The index has been on a roll during June, gaining more than 5%, but it could be about to record its first two consecutive daily declines this month as the positive momentum wanes.
Both the RSI and stochastics are pointing down in the overbought region, signalling some selling pressure in the very near term. However, in the short-to-medium term, the bullish structure remains sound as all the simple moving averages (SMA) are positively sloped, tracking the price action higher.
If the negative bias doesn’t last long and the bulls are able to retake control, attention will quickly turn to the 4,500 level. Successfully conquering this handle won’t end the battle, however, as the 78.6% Fibonacci retracement of the January 2022-October 2010 downtrend lies not that much higher at 4,533.37. Even higher, the March 2022 peak of 4,637.36 could be targeted next before aiming for the all-time high of 4,817.51.
However, should the selloff gather pace, leading to a steeper downside correction, the 61.8% Fibonacci of 4,310.31 could offer support before the 20- and 50-day SMAs come into play near 4,275 and 4,190, respectively. The 50% Fibonacci slightly above the 4,150 mark is also an essential support for propping up the uptrend, as is the 38.2% Fibonacci just beneath the psychologically important 4,000 level, where the 200-day SMA appears to be headed for.
In brief, the current bearish reversal appears to be nothing more than an overdue correction and the outlook remains distinctly bullish. However, with some key barriers standing in the way of reaching the index’s all-time high and momentum indicators trading in overbought conditions, the rally’s days may be numbered.
The US 500 stock index (cash) is pulling back slightly from Friday’s highs when it briefly hit a 14-month peak of 4,446.77. The index has been on a roll during June, gaining more than 5%, but it could be about to record its first two consecutive daily declines this month as the positive momentum wanes.
Both the RSI and stochastics are pointing down in the overbought region, signalling some selling pressure in the very near term. However, in the short-to-medium term, the bullish structure remains sound as all the simple moving averages (SMA) are positively sloped, tracking the price action higher.
If the negative bias doesn’t last long and the bulls are able to retake control, attention will quickly turn to the 4,500 level. Successfully conquering this handle won’t end the battle, however, as the 78.6% Fibonacci retracement of the January 2022-October 2010 downtrend lies not that much higher at 4,533.37. Even higher, the March 2022 peak of 4,637.36 could be targeted next before aiming for the all-time high of 4,817.51.
However, should the selloff gather pace, leading to a steeper downside correction, the 61.8% Fibonacci of 4,310.31 could offer support before the 20- and 50-day SMAs come into play near 4,275 and 4,190, respectively. The 50% Fibonacci slightly above the 4,150 mark is also an essential support for propping up the uptrend, as is the 38.2% Fibonacci just beneath the psychologically important 4,000 level, where the 200-day SMA appears to be headed for.
In brief, the current bearish reversal appears to be nothing more than an overdue correction and the outlook remains distinctly bullish. However, with some key barriers standing in the way of reaching the index’s all-time high and momentum indicators trading in overbought conditions, the rally’s days may be numbered.
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