TSX technical analysis suggests investor overconfidence

The first technical look at the S&P/TSX Composite in 2014 suggests that domestic investors are starting the year in a confident mood – probably too confident.

It's generally a good idea to ignore market behaviour during the holidays because of low volume but the stock prices still count. The entire benchmark breached the relative strength index sell signal of 70 late in the year and the results are still apparent in the lack of buying opportunities now.

The RSI for the S&P/TSX Composite stands at 64, close to overbought territory. There is only one stock in the 241 member benchmark below the RSI buy signal at 30: Transcontinental Inc.

Valeant Pharmaceuticals Intl popped 15 per cent in the past five trading sessions so it's no surprise that it is the most overbought stock in the TSX. BlackbBerry Ltd is the second most overbought stock – I didn't believe it either but I rechecked twice.

The trees are still rolling. West Fraser Timber Co Ltd and Canfor Corp remain well into overbought territory after climbing 3.8 per cent and 2.0 per cent respectively over the past week.

Most of the financial have dropped out of the overbought ranks – a lot of them were dangerously frothy in December – but Manulife Financial remains after a 5.3 per cent jump over the past week. Linamar Corp., Veresen Inc. and Canexus Corp are also among the toppy stocks by RSI.

I'd give the usual caveats about technical analysis at this point – it's only part of the equation, the numbers change fast, etc., etc. – but with only one stock in oversold territory there doesn't seem much need this week. Bargain-hunting traders will have to wait for more opportunities.