Technical Analysis | Is it advisable to chase after the rebound in the US stock market?
Technical analysts pointed out that the Nasdaq may rise to 14,000 points in the short term. The technical indicators are still "very complex, but currently slightly favorable to the bears."
A technical analyst on Wall Street said that at the beginning of this week, it seems that the US stock market is forming a relieving rebound, but the potential return from the current level of rebound is still limited.
Tyler Richey of Sevens Report Research said that as of last Friday's close, US stocks fell for the third consecutive week in August.
The Relative Strength Index (RSI) is an indicator that measures the speed and magnitude of recent price changes in an index or stock to assess overbought or oversold conditions. Traditionally, an RSI above 70 is considered overbought, while below 30 is considered oversold.
Is the US stock market rebounding? Should we chase it?
The chart below shows that the RSI indicator reached the overbought zone in the middle of last week and then fell into the oversold zone on Thursday.
Richey stated in a report on Monday that S&P 500 futures "fell sharply to a new low for the week" last Friday, but the new low in the RSI indicator did not confirm this, which means that the market is preparing for a potential rebound this week, with key resistance levels between 4465 and 4515 points.
"It is crucial for the stock market's recent trend whether this upward momentum can break through the downtrend line in August, because if it fails to break through, the path of least resistance for resistance will be lower," he wrote.
Richey said that the Nasdaq Composite Index is ready for a relieving rebound and may rise to 14000 points in the short term. However, he also mentioned that if the Nasdaq reaches this upward target in early autumn, it will eventually become a resistance level.
The chart below shows that the technical indicators of the Nasdaq Composite Index are still "very complicated, but slightly favorable to the bears," according to Richey. The Relative Strength Index is the only indicator that favors the bulls to some extent, as it confirms the recent stabilization of the Nasdaq.
This supports the view of a bear market for the next few months.
