Technical Analysis | Will there be a significant pullback in the US stock market?

Last week, the S&P 500 index broke through the 4,500-point mark, reaching its highest level since April 2022.

This happened against the backdrop of earnings season, and some people say that because there has already been a significant increase, earnings season may not boost the stock market as it has in the past.

In addition, technical analysts are also concerned about the frenzy in the US stock market.

US stocks are expected to experience a correction

"More and more concerns are that both may be overheated, leading to a stock market crash, which could lay the groundwork for a crash."

He correctly predicted that the closing low of the S&P 500 index on October 12 last year would mark a lasting bottom. He believes that any correction will be just a correction, not the start of a new bear market, as his company believes there is only a 25% chance of a recession in the next two and a half years.

He expects that the bull market that started in October last year will continue until "at least the end of next year," and within the next 18 months, the S&P 500 index will reach new highs between 4,800 and 5,400 points.

He added that the S&P 500 index, S&P 400 index, and S&P 600 Information Technology index will lead the market, and pointed out that from the chart below, it can be seen that these three indices are expected to reach new highs.

The market is already overbought

More comments about the adjustment of US stocks come from the founder of Kobeissi Letter, who also said, "US stocks should have corrected earlier." He said that they switched to a bearish view after cashing out on the bullish trend in US stocks last week.

Kobeissi stated that the S&P 500 index broke above the upper band of the daily Bollinger Bands on July 14, and the daily relative strength index also showed "severely overbought technical conditions."

Trader Tom said that the moment when "everyone is in the pool" has arrived. He pointed out that the CNN Fear & Greed Index may show six consecutive weeks of "immersion in a market driven by frenzy."

He included the NAAIM Exposure Index, which provides insights into the positions of active fund managers, and noted the situation where extreme greed and high risk exposure coexist, which has often led to a significant market decline in history.

Tom expects the S&P 500 index to initially correct to the range of 3,950 to 4,100 points. He said, "I believe that within this range, it is most attractive to consider establishing positions and adjusting the scale of long trades."

He stated that the points above the index correspond to key points on the volume curve, **representing the places with the highest trading volume since the peak in 2022, which should provide support for the index during any decline. **