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US 500 index snaps downtrend

ByXM Group
AuthorTrading Point
Published 11/15/2023, 11:34 AM
Updated 05/01/2024, 03:15 AM
  • US500_15_11_daily
    • The US 500 index breaks downtrend after amazing rally
    • Short-term bias bullish, but overbought conditions evident

    The US 500 stock index (cash) enjoyed its fastest daily rally (+2%) in a year on Tuesday, successfully scraping off the aggressive sell-off that started on September 15th to trade around 4,500 again.

    The latest bullish explosion indicates that the price will continue to rise as it is significantly above the descending trendline from July and its simple moving averages. Yet, the overbought signals coming from the RSI and the stochastic oscillator are warning that the acceleration might be unsustainable, especially as the 4,530 high from September is within breathing distance. The latter also overlaps with the 78.6% Fibonacci retracement of the 2021-2022 downtrend.

    If the bulls eliminate downside risks above 4,530, all the attention will turn to the 1½-year high of 4,606 registered in July. The March 2022 peak of 4,637 could come in sight as well ahead of the 4,715 barrier last seen in November 2021-January 2022.

  • Should the bears retake control, the index could slump back to 4,415 to test its 100-day SMA and the broken resistance trendline. Another bearish correction lower could halt immediately somewhere between the constraining line from October 2022 at 4,355 and the 50-day SMA. The 20- and 200-day SMAs could next come under the spotlight. If the latter proves fragile, the sell-off could worsen towards the 4,200 area.

    In brief, the US 500 stock index has surpassed key obstacles, violating the downtrend from July’s peak. Hence, a continuation higher is more likely now, though with the index sailing in overbought waters some caution is warranted below 4,530.

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