Overbought conditions make a case for correction

28 Ara 2023

The SPX is less than 1% away from the all-time high. Yet, its overbought conditions on the daily chart are starting to make a compelling case for a correction. To support this case, we would like to see the RSI break below 70 points (on the daily chart). Additionally, we would like to see MACD and Stochastic reverse and begin pointing to the downside. On top of that, we would also want to see a pick-up in volume accompanied by a weakness in the price.

Illustration 1.01

Illustration 1.01 displays the daily chart of SPX, NDX, and DJIA. The green and red arrows highlight a volume growth followed by a subsequent decline that started around 15th December 2023. While the decline is not too significant, it should not be overlooked and dismissed (especially as indices are trending in overbought territory).

Technical analysis
Daily time frame = Bullish
Weekly time frame = Bullish

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.