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Market Analyst
Oversold S&P 500 readings show that the selloff around the U.S. midterm elections pushed the index's daily RSI to extremes last reached during the risk-off move tied to the U.S. Iran war. A rebound from that extreme is one of the technical conditions for a return to risk-on sentiment, and the Nasdaq is showing the same setup. The Dow Jones, S&P 500 and Nasdaq still hold resilient bullish structures despite the steep swings. The durability of those structures now connects directly to sentiment toward the AI and tech sector.
Razan Hilal, StoneX Media Market Analyst at StoneX, covers forex, commodities and equity indices through technical and intermarket analysis. That coverage gives insight into how oversold U.S. equity indices, sentiment toward the AI and tech sector, and moves in the U.S. dollar, crude oil and silver feed into one another.
The S&P 500 daily RSI is rebounding from oversold conditions last reached during the steep risk-off move tied to the U.S. Iran war. The rebound follows a sharp selloff after the S&P 500 pulled back from its uptrend, with price now bouncing from a prior swing low. The three-legged corrective pattern of recent months places that bounce at the 161.8% Fibonacci extension. For traders, an extreme momentum reading that coincides with a Fibonacci extension forms the technical basis for a possible bullish shift, provided the broader market turns back to risk-on sentiment. According to Hilal, "given the extreme oversold conditions, we may already have bottomed."
The Dow Jones, S&P 500 and Nasdaq all held bullish structures through the steep swings around the U.S. midterm elections. "Price is still holding," Hilal explains, "within a resilient and bullish structure across the three charts." The Dow Jones is retesting resistance after rebounding from its post-selloff low, whereas the Nasdaq is holding at a confluence zone where former resistance from its earlier highs has turned into support.
"Once again, that scenario likely to be aligned with an improved risk on sentiment related to the AI and tech sector, of course," Hilal says of the Nasdaq's path back toward the descending trendline from its earlier highs. The Nasdaq daily RSI is also rebounding from oversold conditions, confirming the same momentum extreme seen on the S&P 500.
Silver price action ties the AI and tech sentiment theme to commodities markets. Hilal links a confirmed breakout in silver to "the return for risk on sentiment, especially regarding the tech and AI sector". Silver is rebounding from a multi-decade resistance zone that has turned into support, and its daily RSI is recovering from oversold conditions, notably mirroring the setup on U.S. equity indices. For cross-asset traders, silver and the Nasdaq now track the same driver, since both rebounds rest on a recovery in sentiment toward AI and tech.
A possible double top on the Nasdaq is the main bearish pattern set against the oversold rebound in U.S. equity indices. Hilal notes that "that scenario has a possible lower probability rate from the bullish rebound given the extreme oversold conditions on the daily and weekly timeframes." The pattern's neckline sits close to where the Nasdaq is retesting, and a confirmed break lower would put the lows from the U.S. Iran war selloff back in focus.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Razan Hilal, StoneX Media Market Analyst
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