The US 500 index posted considerable losses in early October, falling below its 50- and 200-day simple moving averages (MA) before finding support near a long-term uptrend line drawn from the lows of February 2016, and subsequently rebounding somewhat. The index has now crossed back above its 200-day MA, which keeps the broader outlook cautiously positive. For the bias to turn to neutral, the price would need to close below the crossroads of the aforementioned trendline, the 200-day MA, and the 2740 zone.
Looking at short-term oscillators, the RSI is pointing sideways albeit below its neutral-50 line, detecting downside momentum. Similarly, the MACD – already in negative territory – has also crossed below its red trigger line.
Further retreat in the index could encounter a first wave of support near the uptrend line and the 2740 zone, with a downside break turning the medium-term bias to neutral, potentially setting the stage for more declines – initially for a test of the October 11 low at 2707. Even lower, the bears could stall near 2675, the May 29 trough.
On the flipside, a recovery in the market may meet initial resistance around the 2821 hurdle, marked by the peak of October 17. An upside break may see scope for advances towards the 2864 area, defined by the inside swing low of September 7, with even steeper bullish extensions eyeing the all-time high of 2940.7.
Overall, as long as the index continues to trade above the long-term upside support line, the bigger picture remains cautiously bullish.
