The US 30 index is on its fourth day of declines after reaching an all-time high of 21,539.10 on Monday. Today’s decline has led the index to record a one-week low of 21,340.70.
Technical indicators such as the RSI and stochastics are pointing to a change in short-term momentum for the index. The RSI is theoretically in bullish territory at 60, but it has steeply fallen from overbought territory to reach its current level. In addition, the indicator remains downward sloping. Meanwhile, the stochastics are projecting a similar picture with the %K line in bearish territory (after recording a steep fall) and below the slow %D line.
On the upside, Monday’s all-time high of 21,539.10 is likely to act as a point of resistance. Further up, the 21,600.00 level might act as psychological barrier to upside movements as well.
On the downside, today’s decline violated the Tenkan-sen line (red), which was providing intra-day support at 21,378.00. The 21,300.00 handle, a potential psychological level, could provide some support. Another likely important support area is the one formed by the Kijun-sen line (blue) at 21,089.10 and the 21,000.00 psychological mark. Notice that the 50-day moving average (MA) at 21,020.00 is also in between these two points.
As regards the medium-term outlook, it remains bullish given the significant advancing by the index since the start of the year. Further supporting this is the fact that the index level is comfortably above the 50- and 200-day MAs as well as the Ichimoku cloud top, while both MAs are currently upward sloping. A note of caution though as the considerable divergence from the 200-day MA might be indicative of an overextended rally.
Overall, the near-term momentum is currently looking negative and the medium-term is bullish.
