US100 Stock Index Hits 7-Month Low; Turns Increasingly Bearish

Technical analysis of Forex market

The US 100 stock index plunged to a 7-month low of 6439.25 yesterday as the bears continue to pull the price further below the index’s all-time high of 7701.35 set on October 1. Momentum indicators point to further weakness in the near term, with the stochastics falling towards oversold territory, while the RSI lies deep in the bearish zone. However, the RSI has ticked higher today, suggesting a moderation of the negative momentum.

Should the sell-off resume, the 123.6% Fibonacci extension of the upleg from 6572.25 to 7218.10 would be the nearest key support to watch around 6420. A drop below this level would reinforce the emerging bearish structure in the medium term. Further down, the 138.2% and 161.8% Fibonacci extensions at 6325 and 6173, respectively, would be the next hurdles that could stall steeper declines.

However, should today’s upside move gain traction, resistance could initially come at the 78.6% Fibonacci retracement level at 6710. Overcoming this barrier would clear the way for the 61.8% Fibonacci at 6818, followed by the 50% Fibonacci at 6895. A break above the 50% Fibonacci region around 6900, which also incorporates the 20-day moving average, would help ease the downside pressure and shift the near-term bias to a positive one.

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