Financial Services News, September 5 (Editor Liu Rui) On Tuesday, US stocks experienced a sharp decline, and tech giants such as Nvidia have been falling for several days, causing the market to worry that recent trends in US stocks may be under pressure.

On Wednesday EST, Jeff DeGraaf (Jeff DeGraaf), founder of Renaissance Macro Research and technical strategist, said that this round of decline in US stocks has clearly not come to an end.

He anticipates that the Nasdaq 100 index may fall to 17,000 points in the short term, a key technical level he is monitoring, down 5% from the current level (17084.3 points).

As for the S&P 500 index, he expects it may fall back to the low of 5120 points in early August. This level is about 7% below the current level (5,520 points).

Market sentiment is still too bullish

Digraf is worried that the current US stock market sentiment is still in a bullish range, and this usually does not occur when the market is at or near the bottom.

“When we look at what small speculators think about NASDAQ mini futures, they are still very, very net long. In other words, they have been taking advantage of the current weakness in US stocks as a buying opportunity. And this is usually not the right performance when the market bottoms out.” Digraf said.

The S&P 500 has now fallen about 3% from its all-time high, and the Nasdaq 100 index is down about 8%.

Considering the historical poor performance of US stocks in September, US stock traders still maintained such a bullish sentiment, which is even more worrying.

Interest rate cuts on US stocks are not conducive to the rise of technology stocks

Furthermore, it is counterintuitive that the Federal Reserve's interest rate cut may not be conducive to higher US stocks.

Digraf said that since the start of the US stock bull market in October 2022, technology stocks have always led the market higher, but throughout history, in the three months after the Federal Reserve first cut interest rates, technology stocks generally did not perform well.

“When we pay special attention to technology stocks, after the first rate cut, they usually don't perform well. Technology stocks are very pro-cyclical. Cyclical stocks tend to perform poorly for at least three months after the Federal Reserve first cut interest rates.”

However, judging from the current US economic data, the Fed's interest rate cut in September is almost certain: “The US economic data may continue to weaken. I think this is one of the difficulties we are facing.”

The outlook for US stocks in September is poor

As to how US stocks will fall in the future, Digraf predicts that US stocks may weaken further until the end of September and spread to early October.

He believes that the next two months will be a window period for horizontal fluctuations in US stocks, which may be “quite frustrating.”

Digraf predicts that short-term US stock risks tend to decline, and this may cause investors to fall into an “extreme panic” mood, similar to the situation when the yen spread trading collapsed in early August. Until then, US stocks are likely to continue to fluctuate lower:

“We haven't seen this yet, which is why we think this adjustment may continue for some time until the end of the adjustment.”