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Technical Analysis – US 500 cash index on the brink of a bearish move

  • US 500 index is trading sideways amidst key market events

  • It failed to record a new 2023 high, denting bullish sentiment

  • Momentum indicators point to increasing bearish pressure

The US 500 cash index is trying to record a green candle today as it trades in the busy 4,533-4,550 area. The aggressive move from the October 27 low appears to have run out of steam, especially after the US 500 index failed to record a new 2023 high, above the July 27, 2023 high of 4,607.

The current bullish trend is still assumed to be in place, but the momentum indicators are ready to turn bearish. The Average Directional Movement Index (ADX) peaked on November 24 but it is now edging lower and thus pointing to an aggressively weakening bullish trend. Similarly, the RSI traded at a 3-month high, but it is now heading towards its 50-midpoint. More importantly, the stochastic oscillator has broken below its moving average and appears ready to exit its overbought territory. Should this move take place, it will be seen as a strong bearish signal.

Should the bulls wish to record a higher high, they could first try to keep the US 500 index above the 4,533-4,550 area, which is populated by the September 3, 2021 high and the 78.6% Fibonacci retracement level of the January 4, 2022 – October 12, 2022 downtrend. They could then have a go at recording a new 2023 high and possibly test the resistance set by the March 29, 2022 high at 4,637.

On the flip side, the bears are trying to regain the upper hand, and are keen to break below the 4,533-4,550 area. If successful, they could then stage a sell-off towards the 4,385-4,422 range, which is set by the 50- and 100-day simple moving averages (SMAs). Even lower, the 4,262-4,310 area could prove tougher to crack than currently envisaged.

To conclude, the impressive rally in the US 500 index from the October lows has probably run its course as momentum indicators are ready to signal the start of a new bearish move.

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