The US 500 stock index (cash) crashed by another 11% on Tuesday as the US fiscal stimulus proposals seem to be spreading panic rather than reassuring investors.
The index fell as low as 2,362, violating the 200-period simple moving average (SMA) on the weekly chart for the first time since 2011. Still, on the positive side it managed to halt the sell-off near the 2018 trough, keeping its long-term uptrend safe for now.
On the daily chart, technical signals are not encouraging either. Although the RSI and the Stochastics seem to have found a bottom in the oversold area, the oscillators have yet to show a convincing rebound, while the MACD keeps decelerating within the bearish territory, hinting that more downside cannot be ruled out. Also, the index itself has broken its upward direction off the 2018 low, while the shorter-term SMAs have negatively crossed the longer-term SMAs.
A drop below the 2018 trough of 2,332 could confirm another downside extension probably towards 2,250 where the market found support during the 2016-2017 period. Piercing that barrier, the focus will then shift to 2,190, while a break below 2,100 could open the door for the 2,000 round-level.
In case the price turns up, the bulls should push above the 2,700 nearby resistance and to try keep control until 2,860. If the latter allows more upside, traders will be eagerly looking for closure above the 20-day SMA, while a move above the 200-day SMA and specifically higher than 3,140 would eliminate worries of a down-trending market.
Summarizing, the US 500 stock index may remain exposed to downside movements if the 2018 trough of 2,332 fails to hold. In the long-term timeframe, a break below that threshold would also ruin the market’s upward direction.
