In May, the Nasdaq100 index once again demonstrated significant growth in US markets, which also had a positive impact on global markets. The index neared the 19,000 level, showing an increase of over 11% from the lows seen on April 19. However, a wave of selloffs caused a 2% decline in the index from its peak to bottom, raising concerns about the possibility of a long correction.
From a technical standpoint, the Nasdaq100 index is approaching the overbought zone on the RSI on daily timeframes. While this zone typically represents a period of intense growth, it is also a phase of increased unpredictability. Despite this, buyer interest remains strong as the index is only 1% above its previous peak. The correction seen in April has already alleviated some of the short-term overheating in the market. Looking back at the correction that took place from July to October last year, it aligns with a classic Fibonacci pattern, bringing the index close to the 61.8% retracement level and just shy of the 200-day moving average. Based on this pattern, a rally to 161.8% is anticipated, reaching around 19,200.
While the Nasdaq100 index is close to an important resistance area, it is possible that the index may consolidate before another upward movement. Barring any significant changes in sentiment or economic data, a gradual decline in equity indices is not expected. The recent downturn in the market was primarily driven by profit-taking following strong macroeconomic data that hinted at a potential tightening of monetary policy. However, this alone is not enough to signal the start of a bear market in equities. It is important to monitor the index’s performance closely, particularly looking for a drop below the previous consolidation level near 18,300, which could signal a trend reversal.
While the Nasdaq100 index is showing signs of potential growth, it is important for investors to remain cautious and attentive to any shifts in market dynamics. Technical indicators and historical patterns can provide valuable insights into the market’s behavior, but external factors such as economic data and investor sentiment can also have a significant impact on market movements. As always, diversification and risk management are key components of a successful investment strategy in navigating potential market corrections.
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