Technical Analysis – US 500 index’s downside bearing curbed as buyers step in

The US 500 stock index (Cash) is trading near the red Tenkan-sen line at 3,952 following an increase in risk appetite around a recorded 14½-month low of 3,809. The rolling over of the 200-day simple moving average (SMA) is feeding a dampening picture in the index, while the bearish 50- and 100-day SMAs are endorsing the decline from the end of March.

The Ichimoku lines are signalling a pause in negative forces, while the short-term oscillators are reflecting the fading in negative momentum since last Friday’s session of trading. The MACD, far south from the zero threshold, has nudged a tad above its red trigger line, while the RSI has turned higher near the 30 oversold barrier. Moreover, the stochastic %K line which has improved, confirms the renewed pickup in sentiment but has yet to confirm that a risk-off bias has evaporated.

In the positive scenario, the red Tenkan-sen line at 3,952 and the 4,000 handle could provide preliminary upside friction towards bullish gains in the index. However, clearing the latter hurdle may set up a test of the tough 4,098-4,141 resistance section. Piloting even higher, the next upside constraints could transpire from the early May highs that currently coincide with the 50-day SMA at 4,295 ahead of buyers eyeing the Ichimoku cloud’s lower band at 4,371 coupled with the 100-day SMA.

Alternatively, if the index remains heavy, durable support could commence from the 3,853 barrier and the 3,809 fresh trough. If the bearish trend strengthens, the price may weigh on the 3,660-3,730 support barricade that took shape around early January 2021. If selling interest endures, the 3,600 low from mid-December 2020 could step up ahead of the 3,511-3,544 support band that extends back to November 2020.

Summarizing, the US 500 index is sustaining a bearish trajectory despite the freshly found footing in the price. For downside risks to abate, the price would need to float above the 4,098-4,141 obstacle.

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