The overbought list is huge, the oversold list tiny and the entire S&P/TSX Composite is now in the technical danger zone. Investors with a shorter-term time horizon might want to hold off for a few days, things are looking decidedly frothy.
The S&P/TSX Composite’s 2.3 per cent return over the past five trading days (Thursday to Thursday) has pushed it well over the Relative Strength Index (RSI) sell signal of 70. This isn’t cause for mass panic. I’m using the 14-day RSI which, although it’s the most widely used RSI measure, can change extremely quickly. Just because the market’s overbought now doesn’t mean it can’t be oversold by this time next week.