US 100 stock index (cash) has retraced more than half of the bearish wave started from the 9,750 top, piercing all its simple moving averages (SMAs) on the four-hour chart and topping at a one-month high of 8,495.
The odds for a downside correction are increasing as the price is testing a familiar restrictive area and the RSI and the Stochastics are flagging overbought conditions.
Should the market weaken, the 8,300 resistance area could help the index to return to recent highs. If not, sellers may keep pressuring towards the ascending trendline currently seen around 8,100, where any close lower could generate steeper losses towards 7,820, especially if the 50- and 200-period SMAs within the 7,900 area are breached as well.
On the other hand, an extension above 8,500 could confirm additional gains up to 8,698, while the 9,000 mark will also be closely watched if the rally picks up further steam. The golden cross between the 50- and the 200-period SMAs is currently in favor of such a scenario.
Summarizing, the US 100 index is trading within overbought waters, increasing the case for some stabilization or a downside reversal in the short-term. Yet, any decline may not be too concerning unless the index retreats below the ascending trendline.
