The widely watched technical indicator that investors use to gauge the health of the trend remains in fragile state, feeding worries that the bear market is far from over. While the technical picture can improve or worsen as markets gyrate and investors adjust expectations based on factors such as the trajectory of bond yields, which are driven by monetary policy expectations and have closely tracked the performance of stocks this year, our baseline scenario is for further weakness in the coming months.

In our view, the weekly momentum indicators need to unwind further. Therefore, a re-test of the June 2022 low appears to be on the cards (note: market sentiment about this was indicated in the last article). In the very short-term, the Nasdaq-100 index is likely to extend its current rebound to 12,900, before further weakness unfolds in the seasonally weak month of October.

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