US 100 index trades sideways following strong start to new trading year

The US 100 index is trading sideways following a climb of 900 points since December 28. This upward move appears to enjoy the universal support of the momentum indicators. The Average Directional Movement Index (ADX) is moving aggressively higher, and the stochastic oscillator is just below its overbought territory. Even the usually conservative RSI is hovering comfortably above the 50-midpoint.

The recent move higher has pushed the US 100 index above both the 50- and 100-day simple moving averages (SMAs) and the August 16 downward sloping trendline, potentially confirming the bulls’ determination. However, when the market is sending such a homogenous message, chances are that something could break soon, signaling a potential trend change.

Should the bulls continue to push the market higher, the first resistance could come at the 23.6% Fibonacci retracement level of the November 22, 2021 – October 13 downtrend of 11,926. The 200-day SMA at 12,017 and the 12,083-12,226 range could potentially trouble the bulls then.

On the other hand, the bears’ first move could be to push the US 100 index below the 11,428-11,472 area, populated by SMAs and the August 16 downward trendline. Upon successfully breaking this area, they could aim for the June 16 low of 11,037.

To sum up, the move higher enjoys the universal support of the market indicators, but the bears could try to reassert their position in the market by pushing the index below 11,428.

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.