- US 500 index rises above long-term uptrend line
- 200-day SMA still holds well
- Stochastic and RSI indicate overstretched market
The US 500 cash index recovered by almost 10% from the bearish wave that started from the all-time high of 5,673.39 and is currently returning to a position above the long-term ascending trend line. The index found strong support at the 2,090 support level, which stands near the 200-day simple moving average (SMA).
Technically, the price is hovering above the short-term SMAs, but the momentum oscillators indicate an overstretched market with a potential downside retracement again. In the overbought area, the stochastic posted a bearish crossover within its %K and %D lines, while the RSI is ticking south above the 50 level.
If price action rises above the immediate resistance of 5,565, there is potential for it to test the record peak of 5,673.39. Rising above that point, the next round numbers, such as 5,800 and 5,900, could be significant resistance levels before hitting the 161.8% Fibonacci extension level of the downward wave from 5,673.39 to 5,090 at 6,030.
On the flip side, a successful dive beneath the uptrend line could meet the 50- and then the 20-day SMAs at 5,478 and 5,412 respectively before plunging to the 200-day SMA near 5,090.
As the market holds above the 200-day SMA the broader outlook is looking bullish. Near-term weakness is expected to remain as long as technical oscillators show negative signs.
