Wednesday, May 22, 2019
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Technical Analysis – US 500

US500 Cash Daily | Econ Alerts

US 500 index posts fresh record high; RSI could be pointing to overextended market.

The US 500 index hit a fresh all-time high of 2,842.60 during yesterday’s trading.

The Tenkan-sen line remains above the Kijun-sen line – with both lines maintaining a positive slope –  and the RSI indicator continues to rise. All these are indicative of the positive momentum that is in place. However, the RSI is well above the 70 overbought level at 84. This could be a sign of an overstretched market, rendering a pullback in the near-term a possibility.

Further advancing could see the index meeting resistance around the upper Bollinger band at 2,863.70. The 2,900 handle, a potential psychological level, lies not far above; combined with the upper Bollinger band, they might form a resistance area to the upside. The stronger bullish movement would turn the attention to the 3,000 mark, this being another level of potential psychological significance.

Should the index record losses, support could come around the current level of the Tenkan-sen at 2,804.05, with steeper declines shifting the focus to the Kijun-sen at 2,755.40 – the range around this point also encapsulates the middle Bollinger line, a 20-day moving average line.

The medium-term picture is undeniably bullish: the index is in an uptrend with price action taking place above the Ichimoku cloud, as well as above the 50- and 100-day MAs which are heading higher.

Overall, both the short-term bias and the medium-term outlook are bullish, though the overbought RSI might be sounding an alarm in the near-term.

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source: XM

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