The US 500 stock index (cash) faced a tough wall near its 20- and 200-day simple moving averages (SMAs) last week, which negatively crossed each other for the first time since March 2020, raising worries the pullback from the record high of 4,808 could gain extra legs.
Structurally, the index sustains a neutral outlook as the latest sell-off has not successfully violated the key low of 4, 270 from September 30 despite the flash drop to 4,221 at the end of January. That said, the falling 50-day SMA continues to reduce its distance with the 200-day SMA, feeding caution that a bearish pattern could still take shape in the chart.
In the meantime, the momentum indicators are not favoring bullish actions. The RSI and the Stochastics are decelerating towards their oversold levels, while the MACD is negatively charged below its red signal and zero lines, suggesting a continuation towards the 4,270 low. If sellers manage to crack that floor, the price could retest the 4,221 trough before tumbling to 4,137. Running lower, some consolidation could emerge around May’s low of 4,034.
In the event the bulls take the lead, the focus will be on the 20- and 200-day SMAs and the 4,472 resistance. A successful penetration at this point could clear the way towards the 100-SMA and the 4,590 ceiling unless the 50-day SMA eases bullish pressures beforehand. Any step higher could bolster buying appetite, bringing the broken ascending trendline next into view near 4,700.
Summarizing, the US 500 stock index is surrounded by bearish tides in the short-term picture and, despite its sideways trajectory over the past four months, risks for a downtrend extension remain alive. Â
