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US 30 Cash Index Correction at Tipping Point

The US 30 cash index has been under bearish pressure after registering a new 2023 high and its highest print since April 2022. It is trading sideways today, testing the support set by the October 13, 2022 upward sloping trendline. The previous three times this trendline was tested, the bears failed to record a decisive sell-off, geometrically increasing its importance.

The momentum indicators remain mostly supportive of the current downleg. More specifically, the RSI has reached its lowest point since the March 2023 correction. Similarly, the Average Directional Movement Index (ADX) is edging higher and thus signals the presence of a bearish trend in the market. Interestingly, the stochastic oscillator remains in its oversold territory (OS) and still holds a good gap from its moving average. It can hover in its OS for a considerable amount of time before signaling a reversal.

The bears’ determination will probably be put to the real test by the October 13, 2022 trendline. If successfully broken, the 100-day simple moving average (SMA) at 34,097 is unlikely to trouble the bears much. However, the same cannot be said for the next support area at the 33,518-33,754 range that is populated by the 200-day SMA, the October 1, 2021 low and the 61.8% Fibonacci retracement of the January 5, 2022 – October 3, 2022 downtrend respectively.

On the flip side, the bulls’ first target would probably be to defend the October 13, 2022 trendline. They could then have a go at the busier 34,656-34,930 range, which is defined by the December 13, 2022 high and the 50-day SMA. Even higher, the 35,091-35,496 area would then stand in bulls’ way.

To sum up, the fate of the current pullback depends on the US 30 index bears clearing the support set by the October 13, 2022 trendline.

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