Technical Analysis – US 100 index erases gains, flirts with downside retracement

Melina Deltas, XM Investment Research Desk

The US 100 (cash) index is recording its second day of losses after a failed attempt to break significantly above the 50-day simple moving average (SMA).

Chances for an upside reversal, however, are decreasing as the 20-day SMA is pointing down and the momentum indicators are suggesting that the next move in the price is more likely to be down. The MACD continues to strengthen to the downside and below its trigger line, while the RSI is sloping south below the neutral threshold of 50.

Another step lower may reach a key support at 10,695 ahead of the 38.2% Fibonacci retracement level of the up leg from 6,635 to 12,465.02 at 10,230. Should this prove a weak obstacle, the selling could pick up speed until the 9,758 line and the 200-day SMA around the 50.0% Fibonacci of 9.534.

Alternatively, in case of a rebound, immediate resistance could come from the 23.6% Fibonacci of 11,080. Higher, the 20-day SMA at 11,413 could also restrict upside movements, though only a close above 11,550 and the all-time high of 12,465.02 would confirm the start of the uptrend again.

To sum up, in the short-term picture, the index is still in bearish mode and that is unlikely to change as long as it holds well below the 20- and 50-day SMAs.