S&P 500 RSI Divergence Signals Increased Pullback Risk

The S&P 500 rose after the second quarter earnings season, but the RSI failed to strengthen in tandem, instead weakening and forming a divergence. Historically, similar signals have appeared before market pullbacks of around 10%. Technically, an RSI falling below 50 typically indicates a further weakening of market momentum; if it approaches 30, it suggests that the market is gradually entering an oversold territory, which has sometimes been followed by subsequent rebounds. Currently, technical signals indicate a short-term pullback risk, but a moderate pullback may create space for future recovery. With only about two months until the U.S. midterm elections, market expectations for further tightening by the Federal Reserve are rising, and U.S. stocks may enter a phase of higher uncertainty. A moderate pullback can help the market digest previous gains and lay a healthier foundation for potential rebounds after the midterm elections. Past performance does not guarantee future results.

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