The US30 has dropped from its bullish zone into its neutral area between the blue bands. On a relative basis, this is a bearish development. Moreover, the stochastic has slipped below 80 (red square). This decline is indicative of waning momentum.
The index needs watching as the appreciation since mid-July may prove to be a bear market rally. A movement back into the bullish area, between the upper blue and red bands, will help nullify this scenario. However, it will be highly damaging if the index drops into the bearish zone between the low blue and red bands, as the July-August bulls "abandon ship."
The H4 chart shows a sharp decline. This timeframe stochastic is in the lowest quintile (green rectangle), suggesting a solid underlying bearish momentum. The longer it maintains, the greater the likelihood of further downwards pressure. The H4 RSI does indicate that the index is oversold, implying a probable floor below current levels. However, bears may target any rallies from here, and caution is warranted.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.