Back to Blog

US markets begin an overdue correction to ease overbought conditions

Jason Sen

The E-mini S&P 500 has been in a powerful bull run since the end of December. The 284-point rally topped exactly at two-month trendline resistance at 2896/99. Note how resistance at the upper Bollinger band on the four-hour chart also held and the index sold off to hold the lower Bollinger band.

Click to expand image

The negative engulfing candle is a minor sell signal on the daily chart in severely overbought conditions. (A break above 2905 is required to target 2912/14, then 2924/26.)

Click to expand image

We need a small correction to ease severely overbought conditions now so a drift lower would not be a surprise. Yesterday we held two points above first support at 2875/73 but a break below 2870 risks a slide to 2860/58. Below here look for 2854/53 then a buying opportunity at 2846/44, with stops below 2840.

Click to expand image

The E-mini Dow Jones hit profit-taking in severely overbought conditions. We held short-term 38.2% Fibonacci support at 26110/100 but more important is the two-month trendline support at 26060/040. Long positions need stops below 26010. Further losses would target 25975/965, perhaps as far as 25910/900.

Click to expand image

The first resistance is at 26250/260. Gains are likely to be limited but above here try short positions at 26315/325 with stops above 26360.

Click to expand image

The Nasdaq 100 is holding minor resistance at 7636/40 after the break higher in overbought conditions. Above here look for 7655/60, perhaps as far as 7683/86.

Click to expand image

Holding minor resistance at 7620/15 targets 7600/97, then 7590/87, before good support at 7580/78. We bottomed exactly here in fact but further losses today target 7562/60. A break lower is a minor sell signal targeting 7545, perhaps as far as 7525/22.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

Share this post

Back to Blog

Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading these products with this provider.
You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money.