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The good news is that the S&P/TSX Composite Index had a great week. The bad news is that the equity market looks a bit ahead of itself and investors should back off for a bit rather than trying to ride the wave.

The domestic equity benchmark jumped a terrific 1.8 per cent over the past five trading sessions but its Relative Strength Index (RSI) reading, my favourite short term technical indicator, is bumping up against the overbought signal.

In the past two weeks, the number of oversold, technically attractive stocks in the TSX has fallen from 30 to two, while the ranks of overbought, toppy-looking stocks has swelled from 22 to 35 stocks. At this point, only Trinidad Drilling Ltd. and Primero Mining Corp. are attractive according to RSI.

The S&P/TSX Composite is the focus chart this week because previously, things have not gone well when the benchmark breached the RSI sell signal of 70. The current RSI reading of 68.5 is close enough for concern.

The sell signal successfully predicted market downdrafts in September 2012, January 2013, October 2013, and most recently, July 2014. These corrections have been minor and current conditions are no reason to panic. But traders and investors with shorter term time horizons should hold off on buying for a few days because the probabilities point to better prices in the days ahead.

The oversold, technically vulnerable list of domestic stocks includes a number of stable companies, like Brookfield Asset Management Class A and Canadian Imperial Bank of Commerce, where investors should just ignore the froth and ride it out. There are others, however, like Canadian Tire Corp. and Interfor Corp., where investors should consider taking at least some of their profits. Also, you know you have frothy market conditions when Quebecor Inc. is overbought (although admittedly not by much).

Usual caveats apply. I use the most common RSI method, which tracks prices over the previous 14 days. This is a very short time frame and the results can change quickly. Investors should always do their fundamental research before buying any investment.

Follow Scott Barlow on Twitter @SBarlow_ROB.

NameTickerRSI1W Return %PE Ratio TTMPE Ratio Fwd
**OVERSOLD**
Trinidad Drilling LtdTDG-T29.590.3126.2414.61
Primero Mining CorpP-T29.91-5.42N/A48.72
Alacer Gold CorpASR-T30.86-4.969.1310.24
**OVERBOUGHT**
Keyera CorpKEY-T89.562.9039.5128.30
Brookfield Asset Manage-Cl ABAM.A-T86.001.9411.1820.79
Canadian Tire Corp-Class ACTC.A-T83.302.7715.9015.19
Enbridge Income Fund HoldingENF-T80.302.9422.2022.00
Algonquin Power & UtilitiesAQN-T79.554.7227.5821.19
Can Imperial Bk Of CommerceCM-T77.953.3114.1711.82
Dundee Corp -Cl ADC.A-T77.691.94N/AN/A
Extendicare IncEXE-T77.191.29N/AN/A
National Bank Of CanadaNA-T76.811.8211.5511.21
Interfor CorpIFP-T75.9416.9217.9511.73
Inter Pipeline LtdIPL-T75.872.3034.8227.25
Alaris Royalty CorpAD-T75.693.3325.6919.28
Rona IncRON-T75.683.5435.6115.82
Whitecap Resources IncWCP-T75.6114.7235.6725.52
Pason Systems IncPSI-T75.581.4737.9718.90
Russel Metals IncRUS-T75.492.3722.3816.99
Westshore Terminals InvestmeWTE-T75.183.9121.3420.56
Boardwalk Real Estate InvestBEI.UN-T75.072.2110.7020.15
Gibson Energy IncGEI-T74.974.8032.2834.49
Granite Real Estate InvestmeGRT.UN-T74.822.4617.66N/A
Wajax CorpWJX-T74.600.5714.8912.27
Canadian Western BankCWB-T74.204.6117.1014.91
Great-West Lifeco IncGWO-T73.571.1614.1412.09
Capital Power CorpCPX-T72.902.0121.0018.73
Dollarama IncDOL-T72.731.5826.1521.01
Bonterra Energy CorpBNE-T72.594.0323.8020.19
Chemtrade Logistics Incom FdCHE.UN-T72.315.77N/A18.97
Canfor CorpCFP-T72.3011.5819.3510.72
Open Text CorpOTC-T72.00-0.7628.1414.54
Pembina Pipeline CorpPPL-T71.693.8143.7634.88
Royal Bank Of CanadaRY-T71.561.9013.7012.84
Descartes Systems Grp/TheDSG-T70.973.9565.8721.47
Catamaran CorpCCT-T70.754.0034.7219.81
Canadian Natl Railway CoCNR-T70.371.9922.8919.59
Cominar Real Estate Inv-Tr UCUF.UN-T70.321.1410.25N/A
Quebecor IncQBR.B-T70.043.3917.3312.36
First Capital Realty IncFCR-T70.011.5821.16N/A
Intact Financial CorpIFC-T69.511.6818.9912.36
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