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Correction ahead: The entire TSX is overbought

The S&P/TSX Composite rose 1.5 per cent over the past five sessions and you’d think that’s good news. In a technical sense, however, we now have a problem; the entire index is overbought and there are exactly zero stocks trading at oversold, technically attractive levels.

The Relative Strength Index (RSI) is my preferred technical indicator and the chart shows how effective it’s been at identifying changes in market direction. When RSI climbed above 70, the subsequent one-month forward return for the benchmark averaged 0.002 per cent – barely positive.