Technical Analysis – US 500 index defends bullish direction; bias cautiously positive

The US 500 stock index (cash) managed to crawl above its 100-day simple moving average (SMA) last week and rise as high as 4,170, adding more credence to the short-term bullish trend.

Although the price is marginally below the previous high, a successful break of which is needed to violate the medium-term downtrend, the momentum indicators have started to flash overbought signals. The RSI is flattening marginally below 70, while the stochastics have already reversed south and are set to cross below 80, suggesting that the bears might be around the corner.

A decisive close above the 4,180 region, where the 23.6% Fibonacci retracement of the 2,183 – 4,808 uptrend is positioned, could eliminate negative risks, likely triggering an exciting rally towards the 4,270 restrictive region. Higher, all attention will turn to the 4,310 key resistance zone and the 200-day SMA. If the bulls claim the latter, the next obstacle could occur around 4,390.

On the downside, the 100-day SMA will be closely watched at 4,100. Failure to bounce here could produce a sharp decline towards the 20- and 50-day SMAs, which are set to post a bullish cross around 3,992. Moving lower, the bears will next test the support region around 3,915.

All in all, the US 500 index keeps defending its short-term bullish direction, though some weakness cannot be ruled out in the coming sessions as the overbought signals arise.

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