Stock Market Overbought Signals Point to Potential Decline
TL;DR
Nearly half of the S&P 500 components currently have a relative strength index (RSI) reading over 70, indicating overbought conditions. While an overbought RSI is typically seen as a warning sign, historical data shows that when at least 45% of S&P 500 components have overbought RSIs, the average 12-month performance afterward has been a gain of 13%. This suggests that despite the frothy market conditions, it could signal the start of a process towards fresh all-time highs for equities.
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