The US 500 stock index (cash) has been in a sustained uptrend after finding its feet at the 1½ -year low of 3,635. However, the price has exhibited a downside correction since it failed to cross above the 200-day simple moving average (SMA) and is currently hovering around the May peak levels.
The momentum indicators are endorsing the recent retracement. Specifically, the stochastic oscillator is descending close to the oversold zone, while the MACD histogram has crossed beneath its red signal line.
To the downside, should the weakness persist, immediate support could be encountered at the recent low of 4,080. Sliding beneath that floor, the index could descend towards 3,920 or lower to test the May low of 3,810. Any further declines may then cease at the July support of 3,720.
On the flipside, if negative momentum wanes and the price drifts higher, the recent reversal point of 4,325 might act as the first line of defence. Piercing through this region, the bulls could aim for 4,510 before the March peak of 4,638 appears on the radar. A violation of the latter could open the door for the all-time high of 4,818.
Overall, even though the US 500 index’s rebound appears to be running out of steam, it is still too early to call for a reversal of the short-term uptrend. Hence, a profound close above the 200-day SMA could signal the resumption of the recovery.
