The Nasdaq100 index has been a prominent driver of growth in US indices, with a significant increase in value in May. Approaching the 19,000 level, the index has added over 11% since hitting lows on April 19th. However, recent selloffs have brought the index down by 2% from peak to bottom, raising concerns about a potential correction in the market.
Technically, the Nasdaq100 index is on the brink of entering the overbought zone on the RSI on daily timeframes. While this area typically sees strong growth, it also tends to be less predictable. Buyers are still showing interest in the index, as it is only 1% above the previous peak. The correction in April helped alleviate some of the short-term overheating in the market, but the index is approaching an important resistance area near 19200.
The Nasdaq100 index’s movement in the past year follows a classic Fibonacci pattern, with the index nearing the 61.8% retracement level of the original rally and the 200-day moving average. This could signal a potential consolidation before another upward move. As long as there is no significant change in sentiment or economic data, a steady decline in equity indices may not be expected. The recent profit-taking driven by strong macroeconomic data might suggest tighter monetary policy, but it may not be enough to trigger a bear market.
Warning Signs
It is important to monitor the Nasdaq100 index closely, as a drop below the previous consolidation level near 18300 could indicate a trend reversal. While the index has shown resilience in the face of recent challenges, a significant shift in market dynamics or economic indicators could lead to a more substantial correction. Investors should remain vigilant and adjust their strategies accordingly to navigate potential market changes in the coming weeks.