(Bloomberg) -- Coming off a three-month losing streak, US stocks have powered to a 7.3% gain in November, the biggest jump in over a year. While macro factors like cooling inflation, along with bearish positioning, helped fuel the rally, investors are also scouring charts for clues on whether the advance can persist.

One is the S&P 500 Index’s 14-day relative strength index, which is nearing the 70 level that some technicians view as a sign of overheating. Just three weeks ago, the RSI fell below 30, a reading that often portends rallies. Such a rapid about-face, from oversold to overbought within one month, is rare. But it historically bodes well for equity gains in the near term. 

There have been just 11 such instances since 1950, and the index was higher 21 days later 82% of the time, with a median gain of 2.4%, according to Andrew Thrasher, a technical analyst and portfolio manager at Financial Enhancement Group. 

“There’s a shift from selling pressure to buying pressure through either stock participation or fast changes in momentum via the ‘oversold’ to ‘overbought’ RSI in a matter of just one month,” Thrasher explained. “We’re starting to see signs of that develop now.”

A less rosy signal is emanating from the 4,500 level, where investors often deploy automatic orders to lock in gains. The S&P 500 popped above it earlier in the week for the first time since September. It was down slightly Thursday at 4,496 as of 1:45 p.m. in New York. 

Investors should also keep an eye on other assets for clues on the stock market’s direction, according to Mark Newton, head of technical strategy at Fundstrat Global Advisors. After a big bond rally, Treasury yields are hovering just above a technical support level. The dollar is on a similar precipice to the downside. If either reverses, Newton says, that would hamstring any push toward 4,600 for the S&P 500. 

“Rallies into this time likely could find resistance and might backtrack into early December before the rally can continue,” said Newton, who is watching for the S&P 500 to rise to between 4,561 to 4,578 — just below the July highs — before stalling out around the US Thanksgiving holiday.

A key level on the downside is 4,488. For traders who follow Fibonacci analysis, that represents a 76.4% retracement from the intraday July highs to the October lows.

Willie Delwiche, founder and strategist at Hi Mount Research, is watching for whether the upside momentum will be consistent from here. For instance, Tuesday’s 1.9% rally marked the second time in the past 10 weeks that new highs were greater than new lows on the New York Stock Exchange, according to Delwiche. 

That usually occurs after a market bottom, and it normally leads to broader stock gains since more shares are making new highs and participating in the rally. Tuesday marked the second time in the previous 10 sessions it had happened, with 9-to-1 upside volume — typically a bullish sign that leads to more stock gains. 

Since 1996, there were just 16 prior instances where the the number of advancing stocks on the NYSE outnumbered declining stocks by more nine times, according to Piper Sandler’s Craig Johnson. In each case, the S&P 500 continued to advance, averaging a gain of 1% a month later, 14% in six months and 22% over the next year.

While about 70% of the index’s shares are trading above their 50-DMAs through Wednesday’s close, it stood around 10% at the end of October, a sign of conservative positioning coming into this month, according to Peter Cecchini, director of research at Axonic Capital. Nearly 90% stocks were above their 20-day moving average, which is typically a signal that traders to believe momentum is improving in the short-run. 

Though this week’s rally is also thanks to bearish bets gone wrong. Goldman Sachs Group Inc.’s basket of the most-shorted stocks, which includes names like Beyond Meat Inc. and Maxeon Solar Technologies Ltd., slumped 4% on Thursday after advancing nearly 10% in the past two sessions.

“Positioning was still relatively bearish and many names are being squeezed,” Cecchini added. “Those shorted names tend to have leverage, so they are sensitive to rates moves. Combine all of this with seasonality, which tends to be supportive of risk into year-end, and this type of action is what happens on even a wisp of good news.”

--With assistance from William Maloney.

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