SPX500 moves into overbought territory, introducing possibility of a near-term pullback
Source: www.tradingview.com
The SPX500 weekly chart has moved into overbought territory with its RSI above 80 (green rectangle). This comes as the index nears the 5,000 level. Round numbers often prove to be psychological resistance areas, and this may be the case given the index's frothy indications. I.e. a pullback over the coming weeks is a distinct possibility.
However, the underlying economy is continuing to grow, inflation is moderating, and it is likely that the Federal Reserve cuts rates in 2024. These are all mid-to-longer term supportive of the index and equities in general. The SPX500 is being driven by its largest constituents which are, in turn, being boosted by the artificial intelligence narrative. In effect these stocks may have gotten slightly ahead of themselves with profit taking due and a "buy the rumour, sell the fact" mentality dominating as we progress through earnings season.
However, the equal weighted index (not shown here), whilst not as robust as the SPX500, is also in uptrend, suggesting that there is a general underlying bullishness.
If the SPX500 pulls back and its RSI normalises, market participants may use this as an opportunity to buy back into the market at better prices.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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