The US 500 cash index has been developing within an upward sloping channel, following the rebound on the 39-month trough, achieved on March 23.
The price had a successful jump above the simple moving averages (SMAs) in the 4-hour chart, while the technical indicators are moving sideways, with the MACD crossing just below its trigger line and the RSI flattening above the 50 level.
If price action jumps above the 50.0% Fibonacci level of the downward move from 3,396.64 – 2,173.95 of 2,785, there is scope to test the 61.8% Fibonacci of 2,928. Clearing this key level could see additional gains above the channel towards the 3,140-3,205 resistance area. This is considered to be a strong resistance area, which has been rejected a few times in the past.
If the index fails to return up, then the focus would shift to the downside towards the 200-period simple moving average (SMA) of 2,700 ahead of the 38.2% Fibo of 2,646. Slightly below this line, the 2,621 support and the 50-period SMA are coming next, which if breached, would increase downside pressure and bring about a reversal of the near-term trend. From here, the price would be on the path towards the 100-period SMA and the Ichimoku cloud at 2,522.
The near-term upside momentum is expected to remain as long as price action takes place in the bullish channel and above the Ichimoku cloud.
