The US30 index (Dow 30) has completed four strong bullish weeks, with the price advancing above the 200-day simple moving average (SMA) to top at a two-month low of 32,965 last week.
The market has trimmed a small portion of its gains this week after finding strong resistance around the ascending trendline drawn from the record high of 36,950. From a technical perspective, the weakness could persist as overbought signals in the RSI and the stochastics may encourage profit-taking activities.
Still, the 61.8% Fibonacci retracement of the previous downleg at 32,468 could reject the bearish scenario, but a decisive close above the 32,800-33,280 constraining zone will be needed to bring the bulls back into the driver’s seat. If that turns out to be the case, the price could rally towards the 34,00-34,279 resistance region. A sustainable move higher from here would officially violate the 2022 downtrend.
Alternatively, a step below the 200-day SMA could trigger a sharper decline towards the 31,830 handle. Even lower, the 50% Fibonacci of 31,430 and the 100-day SMA may avert any depreciation towards the shorter-term SMAs and the 38.2% Fibonacci of 30,760.
In brief, while overbought conditions are currently favoring the bears, traders may not take additional selling actions in the near term unless the index dives below 32,468.
