On September 5, Financial Associated Press reported that the US stock market experienced a sharp decline this week, with tech giants like Nvidia experiencing consecutive drops, raising concerns about the near-term trend of the US stock market.

On Wednesday, Jeff DeGraaf, founder of Renaissance Macro Research and technical strategist, stated that the current decline in the US stock market clearly has not bottomed out.

He predicts that the Nasdaq 100 index may fall to 17,000 points in the short term, which is a key technical level he is monitoring, representing a 5% decrease from the current level (17,084.3 points).

As for the S&P 500 index, he predicts that it may fall back to the low point of 5,120 points in early August. This level is about 7% lower than the current level (5,520 points).

The market sentiment is still overly bullish.

DeGraaf is concerned that the current market sentiment in the US stock market is still in a bullish range, which is usually not seen when the market is at or approaching the bottom.

"When we look at the views of small speculators on the Nasdaq mini futures, they are still very, very long. In other words, they have been using the current weakness in the US stock market as a buying opportunity. and this is usually not the right behavior when the market is at the bottom." DeGraaf said.

The S&P 500 index has currently fallen by about 3% from its historical high, and the Nasdaq 100 index has fallen by about 8%.

Considering the poor performance of US stocks in September, it is even more worrisome that US traders still maintain such a bullish sentiment.

Cutting interest rates in the US is not conducive to the rise of technology stocks.

In addition, one counterintuitive point is that the Fed's interest rate cuts may also be detrimental to the rise of US stocks.

According to Diggler, since the start of the bullish US stock market in October 2022, it has always been led by technology stocks. However, looking back at history, technology stocks usually perform poorly in the three months after the Fed's first interest rate cut.

When we focus on technology stocks, their performance is usually not good after the first interest rate cut. Technology stocks are highly cyclical, and cyclical stocks often perform poorly in at least three months after the Fed's first interest rate cut.

Based on the current US economic data, the Fed's rate cut in September is almost certain: "US economic data may continue to be weak, and I think this is one of the difficulties we face."

The outlook for US stocks in September is not good.

As for the future decline of the US stocks, DeGraaf predicts that there may be further weakness in the US stocks by the end of September and spreading into early October.

He believes that the next two months will be a window period of sideways movement for the US stocks, which could be "quite depressing".

DeGraaf predicts that short-term risks in the US stocks are biased downwards, which could trigger investors to fall into a state of "extreme panic", similar to the situation in early August when the yen interest rate differential trade collapsed. Before that, the US stocks may continue to oscillate lower.

"We haven't seen this situation yet, which is why we believe this adjustment may continue for a while until it's over."