The S&P 500 Index was highly volatile last week as market participants reacted to key statements from Federal Reserve officials, the closely-watched Nvidia earnings, and the ongoing crypto market crash. It ended the week at $6.600, down by 4.50% from the year-to-date high of $6.915. 

This article looks at some of the top catalysts for the blue-chip S&P 500 Index and top ETFs like SPY and VOO. 

Top technology earnings

The third quarter earnings has largely ended with 95% of all companies having released their numbers. Nvidia, the most important company on Wall Street today because of its role in the artificial intelligence industry, published strong financial results last week. 

These numbers showed that its revenue jumped to $57 billion in the third quarter, and the management guided towards another record fourth quarter of $65 billion in revenue. The management maintained that there was no AI bubble and that demand was still rising.

Other companies like Walmart, Target, Home Depot, Palo Alto Networks, and Lowe’s also published strong financial results last week. 

Looking ahead, several notable companies will publish their numbers this week. However, their impact on the stock market will likely be muted. 

Agilent Technologies, Symbotic, Zoom Technologies, and Keysight will publish their numbers on Monday.

Analog Devices, Dell,  Autodesk, Workday, Zscaler, and HP will release their numbers on Tuesday, while Deere will release on Wednesday. There will be no earnings on Thursday and Friday because of the Thanksgiving holiday.

These results will come at a time when American companies are doing relatively well despite Donald Trump’s tariffs. Data compiled by FactSet shows that the average earnings growth in the last quarter was 13.4%, higher than the median estimate of 8% before the earnings season started.

US earnings have had double-digit growth in the last four consecutive quarters, which is a good thing. Indeed, the strong earnings have helped to support the stock market in a period of high volatility and risks.

Top macro data  to impact S&P 500 Index

The other potential catalyst for the S&P 500 Index and its ETFs this week will be the upcoming key macro data that will help investors prepare for the next Federal Reserve interest rate decision.

The Commerce Department will publish the latest retail sales data on Tuesday. Economists polled by Reuters expect the data to show that sales rose by 0.4% in September after rising by 0.6% in the previous month. 

These numbers will come a few days after the Bureau of Labor Statistics published encouraging September jobs numbers, which showed that the economy added over 110k jobs during the month.

The other key macro data to watch this week will be the Conference Board consumer confidence report, house price index, pending home sales, durable goods orders, and US inventories.

These numbers will help to predict what the Federal Reserve will do in the next meeting, with odds of rates cut remaining at 60% on Polymarket.

This meeting will come at a time when there are significant divisions at the Fed, with some members urging against rate cuts and others promoting them.

The S&P 500 Index will react mildly to the upcoming UK budget on Tuesday, which will provide more information on potential tax increases in the country. Also, traders will watch for a potential deal between Russia and Ukraine, and the ongoing crypto market crash.

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Oklo stock price has nosedived in the past few weeks, erasing over $12 billion in value as the market cap dropped from $25.7 billion in October to $13.7 billion. It has plunged from a high of $193 in October to $88 today.

Oklo stock dropped as investors sold shares

One reason why the Oklo share price has plunged in the past few months is that some of its shareholders have dumped it. Data compiled by Barchart shows that insiders have dumped 803,323 shares in the past three months. 

At the current price, they have sold shares worth over $70 million. Also, they have dumped over 2.1 million shares in the last 12 months. These shares are currently worth over $184 million. 

Some of the insiders selling the Oklo stock are Jacob Dewitte, the CEO, Caroline Cochran, the CEO, William Caroll Murphy Goodwin, the CLO, and Michael Stuart Klein. 

Insider sales is usually a risky sign because it sends a message that they are not outright bullish on the company. These concerns normally escalate when these shareholders are not buying the stock.

However, insider sales are not always a bad thing as some of the sellers maintain their large positions. Others sell to fund major purchases. For example, Miriam Adelson sold over $2 billion worth of shares in Las Vegas Sands to fund her Mavericks purchase.

Increasing short interest

Oklo stock price has also crashed as investors increase their short positions on the company. Data compiled by Koyfin shows that the short interest stands at 9.20%, up sharply from 0.03% in June this year.

Increasing short interest is a sign that many investors are placing bids against the company, which they expect to deteriorate over time.

One reason for this bearishness is that the company is yet to receive authorization by American regulators. 

Also, investors have shorted the company after it surged hard in the past few months. At its peak, the stock was up by over 3,343% from its lowest level in 2024. It is common for a stock to pullback after going through a major surge. A good example of this is Rolls-Royce, whose stock has pulled back after a multi-year surge.

The stock also plunged after the company published a wider-than-expected loss in the third quarter. Its loss from operations came in at $36.3 million, while its loss before income tax stood at over $29.2 million. Analysts were expecting a smaller loss than that.

Meanwhile, the number of outstanding shares has been in a strong uptrend, diluting existing investors. There are now 156 million outstanding shares, up from last year’s low of 32.3 million.

Most importantly, it is often common for companies in the pre-revenue phase to go through this volatility. A good example of this is NuScale, whose stock has dived by over 66% from the year-to-date high.

Oklo share price technical analysis 

Oklo stock chart | Source: TradingView

Technical analysis also explains why the Oklo share price has remained under pressure in the past few months, falling from the year-to-date high of $194 in October to the current $90.

The stock dropped after forming a head-and-shoulders pattern, a common bearish reversal pattern in technical analysis.

It has now moved below the 50-day Exponential Moving Average (EMA) and the Major S/R pivot point of the Murrey Math Lines tool. 

Also, the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued falling in the past few months. The RSI is nearing the oversold level of 30, while the PPO has moved below the zero line.

Therefore, the most likely scenario is where the Oklo share price continues falling as sellers target the next key support at $50. 

In the long-term, however, the stock will likely bounce back as investors buy the dip and the authorization by American regulators happens.

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The US Dollar Index (DXY) continued its strong rebound this month and is now hovering near its highest point since May 29. It has jumped by over 4% from the year-to-date low and technicals suggest that it has more upside.

US Dollar Index technical analysis

The daily timeframe chart shows that the DXY Index has rebounded in the past few weeks. It has jumped from a low of $96.37 to $100.20 today. 

Technical analysis suggest that the index has more upside to go in the coming weeks. It has formed a double-bottom pattern whose neckline is at $100.20. This is one of the most popular bullish reversal patterns in technical analysis.

The index has moved above the 23.6% Fibonacci Retracement level at $99.62. It has moved above the 50-day and 200-day Exponential Moving Averages (EMA), and the spread is narrowing, a sign that it is about to form a golden cross pattern.

The Relative Strength Index (RSI) and the Stochastic Oscillator have continued rising in the past few months. RSI has moved to 65, while the Stochastic Oscillator has moved above 80.

Therefore, the index will likely continue rising as bulls target the 50% Fibonacci Retracement level at $103.28, which is about 3.20% above the current level. On the other hand, a move below the support at $99 will invalidate the bullish outlook.

Why the DXY Index is rebounding 

The US Dollar Index continued its strong uptrend as concerns that led to its crash earlier this year ease. For example, the impact of Donald Trump’s tariffs have now waned in the past months now that the US has reached deals with most countries. 

It has already reached a deal with China, one of its biggest trading partners. The deal lowered the existing tariffs and a commitment that China will continue supplying rare earth materials to the United State. China has also restarted purchases of US agricultural products like soybeans and corn. 

Second, the risk that Donald Trump would fire Jerome Powell from the Federal Reserve has faded in the past few months. Odds of his firing have plummeted on Polymarket. Instead, market participants are waiting for him to name the next Fed Chair in 2026 when Powell’s term ends.

Third, the US Dollar Index has jumped as the odds of interest rate cuts in the United States fall. Data compiled by Polymarket shows that odds of a cut have jumped to 70% from this month’s low of 50%.

The main concern is that divisions have emerged in the bank, with some officials warning that they oppose another cut in December citing the elevated inflation. On the other hand, some officials have supported cuts, citing the labor market, which has remained under pressure. 

Therefore, the decision to either cut rates or leave them unchanged will depend two officials in the next meeting. 

Looking ahead, the US Dollar Index will react to some notable macro data this week, including consumer confidence, pending home sales, and house price index data. 

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Plug Power stock price has been in a strong freefall in the past few months, moving from a high of $4.57 in October to the current $1.98. Its market cap has dropped from the year-to-date high of $4.9 billion to the current $2.76 billion. 

Why PLUG stock has crashed

Plug Power stock price has been in a strong freefall in the past few months, erasing most of the gains made earlier this year. This decline happened as concerns about the company’s dilution continued.

In a statement last week, the company announced that it raised $375 million of its 6.75% convertible notes due in 2033. In total, the company received about $399 million, which it will use to retire it remaining high-cost 15% debt, refinance its 2026 convertible notes, and eliminate it first lien loan.

This refinancing is a good thing as it will help it reduce its debt and its interest expenses. In a statement, the CEO said:

“With $399 million in new cash, the removal of the first lien, and reduced interest costs, Plug now has one of the strongest balance sheets in years. We are well-positioned to support sales growth in both material handling and electrolyzers as customer demand accelerates.”

Plug Power has been one of the most dilutive companies in the United States as its outstanding shares have jumped. Data shows that the number of outstanding shares jumped to 1.20 billion, up from 576 million in 2022. 

Soaring outstanding shares normally dilute existing investors by reducing their stake in the company. It also reduces their earnings-per-share over time. 

Slow growth is continuing

The Plug Power stock price has come under pressure as investors remain concerned about its slow growth. Its recent result showed that revenue rose to $177 million in the third quarter from $173 million in the same period last year. 

This revenue growth was mostly driven by hydrogen supplies to consumers, whose revenue rose from $25 million to $35 million. Also, its services on fuel systems had an encouraging performance as its revenue rose to $19.7 million from the previous $14.14 million.

At the same time, the company’s sales of its equipment dropped from $107 million to $96 million. This slowdown is notable because it is its biggest business. 

Plug Power stock has also dived because of its substantial losses. Its net loss jumped to $363 million in the last quarter, a big increase from the $211 million last year. Worse, the company’s path to profitability remains long, meaning that further dilution is a big risk.

Plug Power stock price technical analysis

PLUG stock chart | Source: TradingView

The daily timeframe chart shows that the PLUG stock has crashed from the year-to-date high of $4.57 in October to the current $1.98. It recently crashed below the important support level at $1.98, its highest point in July this year.

The stock has moved below the 50-day and 100-day Exponential Moving Averages (EMA) and the strong, pivot, reverse point of the Murrey Math Lines tool. 

Plug Power’s Relative Strength Index (RSI) and the PPO have all continued falling. Therefore, the most likely scenario is where the stock drops to the ultimate support at $1.56 and then starts to rebound as investors buy the dip. Such a rebound will have the stock retest the Major S/R pivot point at $3.13. 

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The Hang Seng Index jumped by 1.30% on Tuesday as global investors embraced a risk-on sentiment. It jumped by 1.25% to $26,040, much higher than this month’s low of H$. So, will the blue-chip Hong Kong Index continue its recovery?

Hang Seng Index jumps amid risk-on sentiment

The blue-chip Hong Kong Index rebound coincided with the performance of American indices on Monday. The tech-heavy Nasdaq 100 Index jumped by over 2% in one of the best trading days this year. Similarly, the Dow Jones and S&P 500 indices were also in the green.

This rebound also happened in other countries in Asia. Japan’s Nikkei 225 Index rose by 73 basis points, while in China, the Shanghai and China A50 rose by over 1.2%. Elsewhere, the booming KOSPI Index jumped by over 1.20%. 

This rebound was boosted by a statement by Christopher Waller and Mary Daly, who concurred that the Federal Reserve should cut interest rates in the next meeting. 

Their statement mirrored that of New York Fed’s John Williams, who expressed concerns about the labor market when advocating rate cuts in his statement on Friday. As a result, odds of a December rate cut rose to 81% on Polymarket.

The Hang Seng Index also soared after the latest Trump and Xi Jinping call in which the two leaders discussed various events. In a statement, Trump maintained that the call was highly productive and that he would visit Beijing in April next year. Xi Jinping will also have a state visit to the United States. 

Still, Trump’s statement avoided any mention of Taiwan, which Xi Jinping pressed him on. Beijing believes that reunification with Taiwan is a matter of priority. 

Top HSI Index gainers and laggards

Most companies in the Hang Seng Index were in the green on Tuesday. Xiaomi’s stock price jumped by 5.48%, while Alibaba Health Information soared by 5.06%. 

Other top gainers in the Hang Seng Index were companies like CSPC Pharmaceutical Group, Kuaishou Technology, ZTO Express, Sino Biopharmaceutical, and Alibaba Group.

Aibaba’s stock price soared by 3.50% ahead of its earnings, which will come out later today. Analysts expect that its business will continue doing well in the third quarter, helped by its cloud division.

Alibaba’s earnings come a day after the company released its main application to rival OpenAI’s ChatGPT. The app drew over 10 million users on the first day.

On the other hand, top laggards in the Hang Seng Index are companies like JD Health, Xinyi Solar, SMIC, Baidu, and Galaxy Entertainment.

Hang Seng technical analysis

The daily timeframe chart shows that the Hang Seng Index formed a double-bottom pattern at H$25,193, its lowest level on October 17 and November 21. This is one of the most common bullish reversal patterns in technical analysis.

The index remains above the 100-day Exponential Moving Average (EMA) and the strong pivot reverse point of the Murrey Math Lines at H$25,780. 

Therefore, the most likely Hang Seng Index forecast is bullish as long as it remains above the double-bottom pattern at H$25,193. If this happens, the next key level to watch will be the ultimate resistance level at H$26,560. A move above that level will point to more gains, potentially to the year-to-date high of H$27,325.

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A crypto rally is happening today, Nov. 25, with Bitcoin and most altcoins being in the green. Bitcoin price jumped to $87,625, while top altcoins like Bonk, Kaspa, Sui, XRP, and Ethebna were up by over 5% in the last 24 hours. The market cap of all coins jumped to over $3 trillion. 

Crypto rally triggered by Fed interest rate cut optimism

One potential reason behind the ongoing crypto rally is that investors are optimistic about the Federal Reserve. Data compiled by Polymarket and Kalshi shows that the odds of a rate cut jumped to 82%. The same happened on the CME Fed Tool whose odds jumped to over 78%.

These odds jumped after a series of statements by dovish Federal Reserve officials, who expressed their support for a rate cut in the next meeting in December this year.

John Williams, the head of the New York Fed, said that he would support a rate cut in December, sentiment that Christopher Waller and Mary Daly shared on Monday.

Cryptocurrency prices normally do well when the Fed is cutting interest or when officials are considering doing so.  Most notably, the upcoming rate cut will come at a time when the bank is ending its quantitative tightening policies.

At the same time, the closely-watched Secured Overnight Financing Rate (SOFR) has continued moving downwards and is now at 3.91%, much lower than the December high of 4.65%. SOFR is an important figure that shows the real interest rate that banks borrow from the Federal Reserve. 

Meanwhile, interest rate cuts will come at a time when money supply is rising globally. US public debt has jumped to a record high, while the global M2 money supply has jumped in the past few months.

Upbit IPO is boosting cryptocurrency prices 

Meanwhile, the crypto market rally is happening after a report showed that Upbit, the biggest exchange in South Korea, was considering an IPO in New York after merging with Naver.

Upbit will join other top cryptocurrency companies that have gone public this year. Bullish and Gemini have already gone public in the US, while Kraken has filed to go public soon.

Other crypto companies like Figure and Circle have already gone public in the past few months. 

Upbit will be a bigger deal than Gemini and Bullish because of its size as it is one of the biggest exchanges globally. CoinMarketCap data shows that it handled over $2 billion in volume in the last 24 hours, higher than Gemini’s $277 million.

Altcoin ETF approvals 

The crypto market rally is happening after the launch of the Grayscale and Franklin XRP ETFs on Monday. The two funds recorded initial day inflows of $67 million and $27 million, respectively. These inflows brought the total in the XRP to over $586 million. 

The SEC also allowed the launch of the first Dogecoin ETF under the Securities Act of 1933. The Grayscale DOGE ETF now has over $1.4 million in net assets. Bitwise and 21Shares will also launch the ETF approvals.

More altcoin ETFs are coming in the near term, including the Grayscale Chainlink ETF (GLNK).

Potential dead-cat bounce 

The other potential reason for the ongoing crypto rally is that this could be a bull trap or a dead-cat bounce, which is a situation where an asset pumps temporarily and then resumes the downtrend.

These dead-cat bounces are popular during bear markets. One way to avoid being caught up in them is being patient and waiting for Bitcoin and other altcoins to move above the key short-term and longer-term moving averages. More gains are also confirmed when these coins move above the Supertrend indicator.

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The XRP price has moved into a bull market after rising by over 24% from its lowest point this month. It has risen in the last three consecutive days and is now hovering at its highest level in a week. This rebound happened after the successful launch of the Grayscale XRP ETF on Monday.

XRP ETF inflows are soaring

The XRP price has done well in the past few days, reaching a high of $2.25 as investors cheered the launch of the Grayscale and Franklin Templeton ETF on Monday. 

These ETF launches were successful, with the Grayscale one generating over $67 million in inflows. Franklin Templeton’s XRP ETF had $62 million in inflows, while the existing Canary and Bitwise had $16 million and $17 million, respectively. 

The total daily XRP ETF inflows jumped to $164 million, bringing the total assets to over $628 million, which is equivalent to 0.46% of the coin’s market capitalization. The total value traded rose to nearly $90 million. 

Most importantly, SoSoValue data shows that XRP ETFs have had inflows in the last seven consecutive trading days. They have never had an outflow, which is notable because they were launched during a crypto market crash.

There is a likelihood that the XRP ETFs will have robust inflows in the coming months. In a report released earlier this year, JP Morgan analysts predicted that these funds would have over $8 billion in assets in the first year. 

One way of estimating the future assets is to look at Bitcoin and Ethereum. Bitcoin ETFs have $116 billion in assets, which is equivalent to 6.54% of the market cap. Ethereum ETFs, on the other hand, have $18.4 billion in assets or 5.14% of the market cap. 

XRP has a market cap of over $135 billion. As such, a 5% allocation in XRP ETFs would bring their total assets to about $6.75 billion, much higher than where they are today. 

Why Ripple ETF inflows are rising

There are several reasons why XRP ETF inflows are rising. First, XRP was created by Ripple Labs, which has become a juggernaut in the financial service industry. The company recently raised $500 million from Ken Griffin’s Citadel and Fortress, bringing its valuation to over $40 billion. 

Ripple Labs hopes to use these funds to grow its network and its market share in the cross-border payment industry. It has already made some major acquisitions this year, including Hidden Road, Rail, and GTreasury.

Second, XRP ETFs are seeing robust demand because of its size. Data shows that XRP is the fourth-biggest coin in the crypto industry after Bitcoin, Ethereum, and Tether. As such, investors view it as a viable alternative asset. 

Third, the network’s growth is accelerating, with Ripple USD (RLUSD) having $1.02 billion in assets, a year after its launch. There are chances that the RLUSD growth will accelerate as stablecoins become more mainstream.

XRP price technical analysis 

The daily timeframe chart shows that the XRP price crashed to a low of $1.8173 on November 21 and has now rebounded to $2.25. Its lowest level this month was a notable level as it coincided with the lowest point on October 10 this year. 

Therefore, there are signs that the coin has formed a double-bottom pattern whose neckline is at $2.6945, its highest point on October 27. A double-bottom is one of the most common bullish reversal signs in technical analysis.

Still, technicals points to more XRP price risk. For one, it remains below the Supertrend indicator and the 50-day Exponential Moving Average (EMA). Therefore, the bearish outlook will persist as long as it remains below these indicators. 

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Novo Nordisk stock price has suffered a harsh reversal this year as the company’s woes have escalated. It plunged to a low of DKK 267.50 on Monday, down by over 70% from its highest point in 2024, with its market cap falling to DKK 4.64 trillion to DKK 1.24 trillion today. 

Why Novo Nordisk stock has crashed

Novo Nordisk, the biggest company in Denmark, has been in a strong sell-off this year as its growth has stalled, pushing the management to lower its guidance several times. 

The most recent woe happened on Monday when the stock plunged by over 6% after the company delivered some bad news. In a statement, the management said that its drug did not offer substantial benefits in the treatment of Alzheimer’s disease.

This trial tested whether semaglutide would slow the progression of Alzheimer’s, a disease that is expected to affect millions of people as more of them age. A success at the trial would have been a good thing for the company by introducing a new avenue to make money.

Still, the fact that the trial failed was not a major shock to many analysts, who believed that the trial was a long shot.

Novo’s business is facing major headwinds

The new headwind came at a time when the company’s business is not doing well. Competition to its popular drugs like Wegovy and Ozempic has affected its business, with the company blaming company compounders like Hims & Hers for its woes.

As a result, it has been forced to slash its guidance several times. The most recent results showed that its sales rose by 12% in the first nine months of the year, with its operating profit rising by 5% to DKK 95.9 billion. 

This growth was driven by its performance in the United States, which increased by 12%, with the Diabetes and Obesity care businesses rising by 12%. 

Most importantly, the company lowered its full-year revenue guidance again. It now expects that its annual sales will be between 8% and 11%. The management said:

“While we delivered robust sales growth in the first nine months of 2025, the lower growth expectations for our GLP-1 treatments have led to a narrowing of our guidance.”

The company faces major headwinds going forward. The most notable one is that competition in weight loss has continued growing. Its most significant competition is coming from Eli Lilly, a company that has become a $1 trillion firm. Its Mounjaro product is valued at over $16.8 billion, a figure that may hit between $55 billion and $78 billion by 2032. 

Pfizer will also become a major competitor after it acquired Metsera in a $10 billion deal. Metsera, which Novo Nordisk wanted, is expected to become a major player in the obesity treatment industry.

Novo Nordisk stock price analysis

The weekly chart shows that the Novo Nordisk share price has been in a strong bearish trend in the past few months. It has plunged from a high of DKK 996 in June last year to DKK 285 today. 

A closer look shows that it has formed a descending channel, which is made up of a series of lower lows and lower highs. It has moved below the 50-week and 200-week Exponential Moving Averages (EMA).

Therefore, the stock will likely continue falling as sellers target the key support level at DKK 200. This view will be invalid if it moves above the important resistance level at DKK 394.

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Gold price has held in a tight range as the bulls lack enough momentum to retest the support-turn-resistance zone of $4,200. Notably, a stronger US dollar and expectations of a hawkish Federal Reserve have curbed the bullion’s gains, at least in the short term. 

However, gold’s safe-haven appeal remains steady as investors worry about the health of the US and global economies. From inflation concerns to a struggling property market in China, US government debt, and worries over an AI bubble, the global economy is under immense pressure.

Notably, these woes have been captured in the fear & greed index, which ended the week at an extreme fear level of 11. While this is an improvement from the previous session’s level of 6, it is a decline from last week’s 21 and last month’s 28. 

Steady demand from institutions and individual investors has held gold price steady above the crucial zone of $4,000 an ounce. This has bolstered gold ETF inflows as investors seek exposure in the metal’s historic rally. 

According to the World Gold Council, the US led this year’s inflows with investors pouring in $43.3 billion in GLD gold ETF, iShares Gold Trust (IAU), and other funds year-to-date. China’s gold ETF inflows are at $13.7 billion ytd; the second-largest across the globe. The Asian country’s total gold ETF assets are now at $31.4 billion; placing it fifth in the world after others like Germany, Switzerland, and the UK..  

GLD gold price technical analysis

GLD ETF | Source: TradingView

The SPDR gold shares ETF ended the week in the green but remained range-bound for the second week in a row. While the bulls remain in control, expectations of a hawkish Fed and a stronger US dollar have curbed its upside potential.

In the short term, the tight range between $370 and $385 will be worth watching. Notably, this range matches the middle and upper Bollinger bands. The neutral RSI of 52 further supports this thesis on sideways trading. 

Even with the possible pullback past that tight range, I expect GLD gold ETF to hold steady above the lower support zone of $360. Notably, the derivative has been trading above that level since rallying above it for the first time on 6th October. 

On the flip side, the lower prices may attract more buyers as economic uncertainties sustain gold’s safe-haven appeal. From this perspective, the buyers may have a chance to push GLD gold price closer to the all-time high hit a month ago. However, it would likely face resistance slightly below that level at $397. 

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South Korea’s KOSPI Index has been in a strong uptrend this year, helped by the country’s president’s commitment to push it to KRW 5,000 earlier this year. It jumped to a record high of KRW 4,244, up by 86% from its lowest level this year. This rally could be about to end after the index formed a risky pattern.

KOSPI Index technicals points to a pullback as the euphoria ends

The daily timeframe chart shows that the KOSPI Index has pulled back from the year-to-date high of KRW 4,245 to the current KRW 3,853.

It has formed a few risky patterns that points to a retreat in the near term. The most important is the double-top pattern it formed at KRW 4,200 and whose neckline was at KRW 3,867. A double-top is one of the most popular bearish reversal chart pattern in technical analysis.

The index has also formed a bearish divergence pattern as the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued falling in the past few weeks. 

At the same time, the index remains much higher than the 100-day and 200-day Exponential Moving Averages (EMA), which are at KRW 3,512 and KRW 3,210. Therefore, the index may be at risk of a bearish reversal in a process known as mean reversion, where an asset moves back to its historical averages.

Therefore, there is a risk that the index will pull back and retest the important support level at KRW 3,500, which is about 9% below the current level.

Why the blue-chip South Korean index has jumped 

There are a few reasons why the KOSPI Index has surged this year. First, the surge was sparked by a statement by President Lee Jae Myung who pledged to move it to KRW 5,000 earlier this year. That was an ambitious pledge as the index was trading at KRW 2,400 at the time.

Second, the index jumped after the United States and South Korea reached a trade deal a few months ago. That deal lowered the tariff that the country pays total US to 15%, much lower than what Trump had threatened before. Since then, South Korean goods shipped to the US have dropped at a lower pace than expected.

Third, the KOSPI Index has soared because of the ongoing artificial intelligence boom as some of its companies are big suppliers to the industry. This includes top companies like SK Hynix and Samsung, which have published strong results this year as demand  jumped.

Meanwhile, there is the perception that South Korean companies are trading at a discount compared to their global peers. For example, despite the ongoing surge, the KOSPI Index still has a PE ratio of 13, much lower than the S&P 500 Index’s 22. 

At the same time, the country is working on measures to make South Korean companies more attractive, including the recently passed Commercial Act that will reduce taxes and regulations.

Still, there are risks to the surge, especially as the fears of an AI bubble rise. A slowdown in AI spending would have a negative impact on some of the biggest companies in the industry.

Another risk is that leverage has jumped in the past few months. Data shows that margin trading jumped to $17 billion this month, up by 50% in the last six months. As we saw in the crypto industry, extreme use of leverage could lead to substantial pain.

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