Will US 500 Index Sail to Record Highs?

• The US 500 index flirts with its 2022 record high
• Lacks momentum, but its trend remains positive above 4,660

The US 500 stock index (cash) recovered its latest pullback, rising swiftly back above its 20-day exponential moving average (EMA) and closer to its record high of 4,817 registered in January 2022.

There is some skepticism in the market as the stochastic oscillator is looking for a negative reversal slightly above its 80 overbought level. That said, the RSI is still sloping upwards comfortably above its 50 neutral mark, leaving a ray of hope that the bulls could stay in charge.

Besides, the positive trend that began at the end of October 2023 remains intact. A break below the 20-day EMA at 4,730 would push the price out of the bullish channel, while a dip below the previous low of 4,660 would confirm a double top pattern, signaling a negative trend reversal.

If the bearish scenario unfolds, the price could decline towards the 4,530 region, unless the 50-day EMA comes to the rescue around 4,630. Slightly lower, selling pressures could retest the ascending line from October 2022 at 4,480, which acted as support several times previously.

In the opposite case, where the index sails into uncharted waters above the 4,817 record high, all the attention will fall to the 4,960 region. Strikingly, the resistance line, which joins all the highs from December 2022 and July 2023, is intersecting the upper band of the bullish channel around the same location. The 5,000 psychological mark will be closely watched too. A sustainable break higher would strengthen the long-term positive outlook.

Theoretically, it is said that traders tend to create new demand for stocks, leading to the January positive effect.

All in all, the loose momentum in the US 500 stock index is currently reflecting weak buying forces. Still, any declines may not raise serious concerns unless the price dives below 4,660-4,730.