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US 500 cash index trades sideways today after strong rally
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Impressive weekly rebound amidst key market events
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Momentum indicators cautiously supportive of current upleg
The US 500 cash index is trying to record its fifth consecutive green candle and further increase the 5% jump recorded this week. It is now preparing to test the resistance set by the long-term October 13, 2022 ascending trendline. Despite the current rally, the bearish series of lower highs and lower lows remains firmly in place since the July 27, 2023 high of 4,607.
Market participants have turned their focus on the momentum indicators for clues on the viability of the current rally. The Average Directional Movement Index (ADX) is edging lower and thus signaling that the recent bearish trend has probably run its course. Similarly, the RSI has jumped higher, and it is currently trading a tad above its midpoint. More importantly, the stochastic oscillator is moving higher, building a good gap from its moving average. This is potentially a signal that the current upleg might have legs.
Should the bulls remain committed to pushing the US 500 index higher, they could try to overcome the October 13, 2022 trendline. They could then plot a course towards the 4,349-4,404 area, set by the 50- and 100-day simple moving averages (SMAs). Even higher, they could retest the 4,533-4,550 range that is defined by the 78.6% Fibonacci retracement level and the September 3, 2021 high.
On the flip side, the bears are probably keen on protecting their recent gains. They could first decide to defend the October 13, 2022 trendline and then test the support set by the 4,256-4,310 area, which 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 200-day SMA. If successful, the path could then be clear until the 4,106-4,154 range.
To conclude, the bulls have retaken market control, but they now need to push the US 500 cash index above the latest peak at 4,397 in order to cancel out the bearish downtrend that has been in place since the July 27, 2023 peak.
