Technical Analysis – US 500 index looks optimistic despite minor retreat


Anthony Charalambous, XM Investment Research Desk

The US 500 index (Cash) has retracted ever so slightly after stalling around the fresh all-time high of 3,831. Although the Ichimoku lines are revealing the ebbing in positive price action, the bullish demeanour of the simple moving averages (SMAs) is defending the positive structure. The withdrawal in price will have to mature into a deeper retracement to have any significant effect on the upwards drive.

The short-term oscillators are transmitting mixed frequencies in directional sentiment. The MACD, in the positive region, is persisting above its red trigger line, while the RSI is deteriorating below the 70 level. The %K lines’ easing in overbought territory is backing the wavering in price, but has yet to confirm negative tendencies.

To the downside, initial friction may develop at the Ichimoku lines currently at 3,749 and 3,721. Should the pullback intensify, downside limitations may then arise from the region of 3,638-3,660. A successful dive underneath the 50-day SMA may pause around the 3,602 boundary before sinking to test the support section of 3,511-3,545.

Otherwise, if buyers manage to drive the index over the newly formed all-time high of 3,831, the bulls may then target the 3,900 handle. In the event buying interest continues to build, next resistance could be met at the 4,002 level, which happens to be the 150.0% Fibonacci extension of the downward leg from 3,396 until 2,183. Thrusting over this too could propel the price towards the 161.8% Fibo extension of 4,145.

Overall, the bullish bearing of the index is cemented above the cloud and the SMAs. Primarily, should it persist above the Ichimoku lines and the 3,660 trough, its improving tone could gain further confidence.