The S&P 500 Index closed Friday at 4,697 points with a slight increase of 0.18% in the day’s trade. The S&P 500 Index is only briefly down from its all-time high of 4,793 points, which it reached this month in January 2024. The broader market experienced a significant surge of 24.2% year-to-date delivering handsome returns to investors.
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However, several indicators suggest that the market has peaked and could open the way for a downward trend. In this article, we will highlight the four indicators that suggest the S&P 500 Index could experience turbulence in the coming weeks.
S&P 500 Index To Experience a Downside?
The U.S. stock market declined last week entering the red territory for two consecutive days. The drop was mostly initiated by Apple Inc., (NASDAQ: AAPL) as U.S. Treasury yields performed better than expected. Puru Saxena, the former founder of Money Management firms in Hong Kong explained that the S&P 500 Index is running out of steam.
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The analyst named four key indicators that suggest the U.S. markets including S&P 500 Index could be losing momentum. Firstly, stressed that the S&P 500 Index is now “rolling over from overbought position”, indicating that stock prices have spiked beyond their intrinsic value. The move points toward a price correction as investors will indulge in sell-offs and initiate profit bookings.
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Secondly, Saxena highlighted that the NAAIM (National Association of Active Investment Managers) is exceeding 100. The development indicates extreme levels of bullishness from active investors who are pumping and withdrawing money and enjoying profits. The move suggests that once the downward trend hits the market, active investors will stay away until the market stabilizes.
Thirdly, the analyst noted that 80% of the S&P 500 stocks are trading above their 200-day moving averages (MAs). The move signifies overextension, making way for a potential pullback of prices. Therefore, the S&P 500 Index remains in stick territory that could head South at any point in the coming weeks.
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In conclusion, Saxena pointed out the U.S. Treasury bond yields rising higher, which could eventually elbow stocks. Higher yields mostly pull stocks down as Treasury yields provide better returns than the Wall Street market.
