The US 30 cash index is edging lower today, testing the support set by the December 1, 2022 downward sloping trendline. Interestingly, a bearish double-top pattern is gradually forming with the neckline standing at the June 26 low of 33,606. A move below this neckline is needed for this structure to be deemed as valid, with the primary target then set at the 32,600 area.
The momentum indicators are not ready to support this developing structure. The RSI remains above its 50-midpoint and the Average Directional Movement Index (ADX) remains stuck below its 25-threshold and thus pointing to a range-trading phase. More importantly, the stochastic oscillator is trading sideways, a tad below its overbought area, and preparing to test its moving average. A decisive move lower would be seen as a bearish signal, favouring the aforementioned double-top pattern.
Should the bears decide to grab the market reins, they would try to overcome the December 1, 2022 downward sloping trendline. They would then come up against the arguably very important 33,367-33,754 area. The combination of the 50- and 100-day simple moving averages (SMAs), the October 1, 2021 low, the 61.8% Fibonacci retracement of the January 5, 2022 – October 3, 2022 downtrend at 33,754 and the October 13, 2022 upward sloping trendline means that the bears’ determination would really be put to the test there.
On the other hand, the bulls would love a retest of the August 16, 2022 high at 34,280. The December 13, 2022 high at 34,930 would be the next aim, a tad below the busier 35,091-35,496 range defined by the April 21, 2022 and May 10, 2021 highs respectively.
To sum up, US 30 index bears are probably feeling more confident on the back of a developing bearish pattern despite the momentum indicators’ muted stance.
