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S&P 500 In Overbought Territory

By Michael KramerStock MarketsAug 15, 2022 03:48AM ET
www.investing.com/analysis/sp-500-in-overbought-territory-200628489
S&P 500 In Overbought Territory
By Michael Kramer   |  Aug 15, 2022 03:48AM ET
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Stocks rallied last Friday, with the S&P 500 finishing higher by 1.7% to close around 4,280. At this point, the index has risen into overbought territory with an RSI now 71 and at the upper end of its Bollinger band.

Additionally, there continues to be a rising wedge pattern in the index, but one that is a bit wider than how I initially drew it out. These things are formidable to gauge to something, and the rising wedge in the RSI seems to confirm that the rising wedge in the S&P 500 continues to exist.

S&P 500 Index, Daily Chart
S&P 500 Index, Daily Chart

Additionally, the index is now within 20 points of closing a gap from May 4. That gap could offer plenty of resistance should the index open higher today and push higher. Regardless, I still think we will likely see a significant pullback to the 3,950 region over the next couple of weeks. The 3950 would be around 61.8% retracement should we top out between 4,280 and 4,300.

S&P 500 Index, 1-Hr Chart
S&P 500 Index, 1-Hr Chart

VIX / VVIX

The VIX and VVIX divergence grows wider, and I am curious to see how much longer this plays out. There appears to be some normalization process, as the ratio of the VIX to VVIX is coming down quickly now, and appears to be on the path to return to the previous uptrend that had been placed. I think this “normalization” process should continue a bit more, but at the same time, I also think it is near its end.

VIX/VVIX Ratio Daily Chart
VIX/VVIX Ratio Daily Chart

Bitcoin

Bitcoin has managed to hold up much than I thought it might, but the outlook appears to be the same. A rising wedge pattern is forming within the bear flag pattern, strengthening the case for this fall lower and potential test 16,400.

BTC/USD Daily Chart
BTC/USD Daily Chart

Apple

Apple's (NASDAQ:AAPL) rally seems overdone. I’m happy to see it rise, as I have owned the stock for years. But it looks unrealistic, especially following an earnings report and guidance that didn’t appear to be among the company’s best. The shares are overbought with an RSI over 70 and approaching its upper Bollinger band. A fill of the gap back to $156 doesn’t seem that hard to believe to me.

Apple Inc, Daily Chart
Apple Inc, Daily Chart

NVIDIA

NVIDIA (NASDAQ:NVDA) gapped below an uptrend, and that is generally very bearish. At this point, it appears to be either revisiting the breakdown or attempting to fill the gap. Either way, the stock looks like it doesn’t have much upside left. The revenue shortfall was significant, and once unless it gives better than expected guidance when they report results, I don’t see how any rally is sustainable.

NVIDIA Daily Chart
NVIDIA Daily Chart

Cisco

Cisco (NASDAQ:CSCO) is in the process of filling a gap from May, and it would be disappointing for the stock not to fill that gap at $48.45, especially given how far it has come in recent weeks. They will report results this week, and those results will probably be a determining factor in what happens next.

Cisco Systems Daily Chart
Cisco Systems Daily Chart

Original Post

S&P 500 In Overbought Territory
 

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S&P 500 In Overbought Territory

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Comments (11)
jason xx
jason xx Aug 15, 2022 4:53PM ET
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What are the odds on Cisco beating?
Aaron Dade
Aaron Dade Aug 15, 2022 12:26PM ET
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Plenty of analysts are saying "the rally is overbought". I think with the weighted charts of equities everyone can agree "risk assets are overbought". The question is are we talking bear continuation to lower low or Bull correction? 3950 says bull correction in medium-term and I think that is more accurate with market PA.
King Agamemnon
King_Agamemnon Aug 15, 2022 8:37AM ET
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166056672355621.jpg
S&P is underbought on the weekly chart. After the reversal off the lows it's just grinding and popping higher. Probably headed to 4600 after it clears the 200 DMA this week.
Kris Jay
Kris Jay Aug 15, 2022 8:37AM ET
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your thesis is that the SP500 will reach new highs like early 2022 before interest rate hikes and QT?
Petet Larkar
Petet Larkar Aug 15, 2022 8:37AM ET
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impossible
King Agamemnon
King_Agamemnon Aug 15, 2022 8:37AM ET
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166058667374598.jpg
166058667374598.jpg Kris Jay  that wasn't what I said. I said it's probably headed to 4600 after it clears the 200 dma. it would have to clear 4773 to reach new highs which I am not advocating at the moment. as of 2pm EST it's just shy of 4300.
jason xx
jason xx Aug 15, 2022 8:37AM ET
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There is plenty left on the weekly.
jason xx
jason xx Aug 15, 2022 8:37AM ET
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You don't understand there is positive forces working on the market too. There is always new money coming in.
Petet Larkar
Petet Larkar Aug 15, 2022 8:04AM ET
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good technician but at times sloppy. plain clueless about valuations but I think he is right here.
David Beckham
David Beckham Aug 15, 2022 8:03AM ET
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All in short now listen to u
cqjhm poufc
cqjhm poufc Aug 15, 2022 7:58AM ET
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Market may close green again! Perma bears gonna perma bear, short squeeze continues.
cqjhm poufc
cqjhm poufc Aug 15, 2022 7:58AM ET
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as you all can see, they are emotional and just down voted me and lo and behold, market closed green ... again
Mario tragik
Mario tragik Aug 15, 2022 7:57AM ET
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omg Kramer, the poor guy tries to hard
Kris Jay
Kris Jay Aug 15, 2022 7:57AM ET
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the more you belittle him without any facts of your own, the more likely he is correct.
Juan C Lebron Carrillo
Juan C Lebron Carrillo Aug 15, 2022 7:49AM ET
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Thanks, start following you ! Realistic analysis.....
Mario tragik
Mario tragik Aug 15, 2022 7:49AM ET
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"realistic" analysis, that is wrong most of the time ok
Gabriele Rinelli
Gabriele Rinelli Aug 15, 2022 7:14AM ET
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thanks a lot !
Zman Trading
ZmanTrading Aug 15, 2022 5:55AM ET
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Great content! Thanks Micheal
 
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