The US 500 index posted considerable gains in recent weeks, trading above a medium-term uptrend line drawn from the lows of April 2, as well as above the 50- and 200-day simple moving averages (SMAs), signaling that the outlook remains positive. The index touched a fresh all-time high of 2940.7 on September 21, and came within breathing distance of that level again on October 3, before pulling back somewhat.
Although the overall picture is still bullish, momentum oscillators suggest that a near-term correction may be on the cards. The RSI – although still above 50 – looks to have topped and is now pointing downwards, signaling that upside momentum is losing steam. Meanwhile the MACD, while safely in positive territory, looks unable to pierce above its red trigger line.
A correction lower in the index could encounter an initial line of support near the crossroads of the aforementioned uptrend line and the 2864 hurdle, marked by the lows of September 7. A drop below this trendline would shift the bullish outlook to a neutral one, potentially opening the way for a test of 2790, the August 2 trough. Even steeper declines would bring into view the 2745 zone, identified by the inside swing high on June 29.
On the flipside, if the bulls stay in control, further advances could stall around the all-time record of 2940.7. A break higher would bring the price into uncharted waters, with the next major resistance barrier likely to be the 3000 handle, which may hold some psychological significance. Similarly, further upside moves could meet barriers at other round figures, such as 3100 and 3200.
Overall, the medium-term outlook remains bullish, though a near-term correction is not to be ruled out.
