Canadian investors have started 2013 in a bullish mood but, at least in the short term, they may have gone too far. Technical indicators point to overbought conditions in a large percentage of market sectors.
The Relative Strength Index (RSI), a much-used tool of technical analysis, compares the extent of positive performance days versus down days for indexes and individual stocks. When the RSI rises above 70, an index is considered overbought and prone to a significant correction. An RSI reading of 30 or below signals that an investment is oversold and poised for a snap back.