Article by ForexTime
The technical picture for the U.S. equity indices reflects the volatile nature of price action over the past week. While the VIX volatility index soared to 30%, the highest it has been since the summer of 2012, as prices on the S&P 500 index sliced through support levels. Price action will likely remain volatile, as buyers swoop in to pick up bargains, but as the large cap benchmark returns to resistance which was former support, short will look to test the bulls resolve.
Prices sliced through support in the past two weeks, dropping through the 200-day moving average at 1906, which will be the first level of target resistance. If traders are able to reclaim this benchmark, they will target the 50-day moving at 1967, which coincides with an upward sloping trend line.
Momentum on the large cap index is negative, as the MACD has reached the greatest negative seen since February of 2014, when the market reached its 2014 lows. In February when the RSI (relative strength index) which is momentum oscillator that measures overbought and oversold levels, hit the oversold signal level of 30, it rebounded and continue to move higher by 225 points from trough to peak.
The Russell 2000 index so price erode first and was the leader on the way down dragging the large cap index lower. The small cap index was higher last week increasing by nearly 2.8%. Momentum on the Russell 2000 has turned higher as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.
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