Bouncing with unsteady steps! US stocks hit a key resistance level, making it difficult to continue the upward trend?

After three consecutive months of decline, the US stock market has risen by 7.3% so far in November, marking the largest increase in over a year. With factors such as cooling inflation and adjustments in bearish positions helping to drive the upward trend, investors are also looking for clues on whether the rally can continue on technical charts.

One indicator is the 14-day Relative Strength Index (RSI) of the S&P 500 index, which is approaching 70, a level that some technical analysts consider overbought. Just three weeks ago, this RSI indicator fell below 30, a reading that typically signals a market rally. Such a rapid shift from oversold to overbought within a month is rare. However, historically, this indicates a short-term market rally.

Andrew Thrasher, a technical analyst and portfolio manager at Financial Enhancement Group, stated that since 1950, this situation has only occurred 11 times, with an 82% probability of the index rising after 21 days, with a median increase of 2.4%. Thrasher explained, "In just one month, there has been a rapid shift from selling pressure to buying pressure through the level of stock trading or the quick change from oversold to overbought RSI. We are now starting to see signs of this development."

Reaching the level of 4500 points for the S&P 500 index sends a less optimistic signal, and investors typically deploy automatic instructions at this level to lock in profits. Earlier this week, the S&P 500 index broke through this level for the first time since September. It closed at 4508 points on Thursday, up 0.12%.

Mark Newton, Chief Technical Strategist at Fundstrat Global Advisors, pointed out that investors should also pay attention to other assets for clues about the direction of the US stock market. After a significant rise in US bonds, US Treasury yields are hovering slightly above technical support levels. The US dollar is also on a similar downward cliff. Newton believes that if either of these situations reverses, it will hinder the S&P 500 index from advancing towards 4600 points.

Newton stated, "The rebound during this period may encounter resistance and may return to early December before the rebound continues." He expects the S&P 500 index to rise to a range of 4561-4578 points, slightly below the high point in July, and then stagnate around the Thanksgiving holiday. The key downside level is 4488. For traders following Fibonacci analysis, this represents a 76.4% retracement from the high point in July to the low point in October.Hi there, Willie Delwiche, the founder and strategist of Mount Research, is currently observing whether the upward momentum will continue. For example, Delwiche mentioned that the US stock market rose by 1.9% on Tuesday, marking the second time in the past 10 weeks that the number of new highs on the NYSE exceeded the number of new lows.

This situation usually occurs after the market hits bottom and often leads to a general rise in the stock market, as more stocks reach new highs and participate in the upward trend. Tuesday was the second time in the past 10 trading days that this situation occurred, with the number of rising stocks being nine times higher than the number of falling stocks. This is typically seen as a bullish signal that can further drive the stock market higher.

Craig Johnson, a strategist at Piper Sandler, pointed out that since 1996, there have been only 16 instances where the number of rising stocks on the NYSE exceeded the number of falling stocks by more than nine times. In both of these cases, the S&P 500 index continued to rise, with an average increase of 1% one month later, 14% six months later, and 22% in the second year.

Peter Cecchini, the head of research at Axonic Capital, stated that although as of Wednesday's close, about 70% of the constituents of the index were trading above the 50-day moving average, this proportion was only around 10% at the end of October. This indicates a conservative position taken by market participants entering the market this month. Nearly 90% of stocks are trading above the 20-day moving average, which is usually seen as a signal that traders believe short-term momentum is improving.

Despite the rebound this week, it is also due to the closing of bearish bets. A basket of heavily shorted stocks from Goldman Sachs plummeted by 4% on Thursday, after rising nearly 10% in the past two trading days. This includes companies such as Beyond Meat (BYND.US) and Maxeon Solar Technologies (MAXN.US).

Cecchini added, "Positions are still relatively bearish, and many stocks are being squeezed. These short names often have leverage, so they are sensitive to interest rate changes. When you combine all these factors with seasonal factors, seasonal factors often support risks before the end of the year, and this type of action can occur even with a glimmer of good news."