US 100 index returns to the red zone

The US 100 stock index (cash) saw its fortunes diminish after the aggressive pullback from the upper resistance trendline at 12,200. Its failure to climb back above the nearby dashed trendline at 11,270 added more clouds to the market today.

While the clear negative trajectory in the RSI and the MACD justifies the current bearish mood, the oversold signals coming from the stochastics provide a ray of hope that a rebound could be possible. This optimism may evaporate if the index crosses below the 11,05010,800 territory to meet October’s low of 10,431. Sliding lower, the next pivot point could be the 61.8% Fibonacci retracement of the 6,634–16,767 uptrend at 9,855. If this proves fragile too, the decline could worsen towards the 9,335 bar, which is the 161.8% Fibonacci extension of the latest upleg.

In the event of an upside reversal, the first target will be the 11,270 bar. Breaching that wall, the recovery may stretch towards the 50% Fibonacci of 11,700, though only a sustainable extension above the 12,000 level and the key resistance trendline would brighten the short-term outlook. A move beyond the constraining line drawn from the 2020 low and the 200-day simple moving average (SMA) at 12,370 would be a greater achievement.

In brief, the US 100 index is at risk of more near-term downside, especially if the floor at 10,800 collapses.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.