The US 500 futures (cash) came under renewed downside pressure last Friday as cracks in the US banking sector resurfaced, with the index drifting lower to mark a new one-month low at 3,845.
The sharp decline squeezed the price below the 200-day simple moving average (SMA), which had been acting as support since the end of January, increasing fears that the sell-off may continue.
While the negative trajectory in momentum indicators keeps the bias on the bearish side, the broken resistance trendline from the 2022 record high, which is currently providing a strong footing near Friday’s low, could initiate some buying.
In the bullish scenario, where the price reclaims the 3,940-4,000 region, which encapsulates the SMAs and the former support trendline from October’s low, the price could advance towards last week’s high of 4,080. A steeper increase could stabilize somewhere between the 4,140 level and the 23.6% Fibonacci retracement level of the 2020-2021 rally at 4,187.
Should the index dive below 3,845, the 38.2% Fibonacci zone of 3,800 could immediately block the way towards the 3,720 floor. Even lower, some congestion could develop near the 3,635 handle.
In short, the bearish wave in the US 500 stock index has paused near a constraining zone, making an upside correction likely. Yet, whether the market will be able to find enough buying interest to return above 4,000 remains to be seen.