Technical Analysis – Is US500 index forming a double top pattern?

Christina Parthenidou, XM Investment Research Desk

US 500 stock index registered three negative weeks in a row and the short-term trading may not get any better yet as the technical indicators keep flashing bearish signals; the MACD has dropped into the negative area and is currently looking stable below its red trigger line, while the RSI seems ready to reverse lower after touching its 50 neutral mark.

The 2,815 level looks to be the neckline of a double top formation and therefore any decisive close under that threshold could warn of a trend reversal, with a confirmation probably coming below 2,728. Before that, the price would need to clear the 23.6% Fibonacci of 2,860 of the upleg from 2,332 to 3,027.

On the upside, the bulls should pass through the 3,000 level and break the 3,027 record high to upgrade the broader positive outlook. In this case, resistance could appear near 3,184, identified by the 161.8% Fibonacci extension of the short downleg from 3,027 to 2,777.

Meanwhile, in the three-month window, the index is holding a neutral status, with the flattening 50-day simple moving average (SMA) reducing the odds for an outlook improvement.

In brief, the US500 stock index is lacking bullish signals at the moment and seems to have formed a double top pattern with a neckline around 2,815, a break of which could downgrade the outlook both in the short and the medium-term picture.