Remember when US stock market used to crash near 60 RSI?

Many pure wall street theorist used to say sell stock when RSI was near 60, and buy stock when they were near 30.......

How times have changed, you will be hard pressed to find any quality stocks near 30 RSI and every quality stock is over 60 RSI, some even higher than 70.....and nobody is worried?

Many new traders or investor are not even aware of what an oversold market looks like......they have not seen any oversold condition since 2009......when S&P 500 was @ 688.......now we are @ 2439.07, a gain of 1751 points or a gain of 255% in 8 years........31.8% gain annually vs historical average of 8%.....

The real question is ......are we near a major top like 2000......

Very few analyst are wondering about this euphoria, new all time high day after day and week after week, even month after month.......

AMZN trading @ 76.67 RSI
GOOG...................74.00
SHOP.....................73.30
Nasdaq                  74.49
SOX.......................70.97
BBRY....................70.69
S&P 500...............69.56
DOW.....................64.75

This is just a sample of a very disturbing picture......

NOW.....cheerleaders will tell you it is not 2000 valuation .......where eyeballs were the metrics used...but fundamental analysis, which has lasted since birth of Wall & Broad street.....are well served by following "rules of engagement".....60 is overbought.........

Every euphoria has ended badly, not a single one has been spared since first trading days, railroads, plastic, oil, Interstate boom, Y2K....all met the same fate.....a long drawn out bear market which lasted anywhere from 5 to 7 years .......

Are we close to anything like that........

In 2000 S&P 500 peaked @ 1500+

In 2017 June we are @ 2439......a gain of 939 points or 62.6% or annualized gain of 3.68%.....well below 8% average gains.......

To get to average gain of 8% per year, we need to get to 3540 in S&P 500...which is another 1100 points away......or we should go up another 45% higher......

Normally we always overshoot.....so a 10% annualized gain is not out of question......

BUT...before we go too far, there is a very good chance of 5% pullback very soon......

Keep all this stat in your mind in any future allocation....

Good luck with your own analysis & comfort level.

BLOG does NOT give buy or sell.

Saleem




             

Posted in: Mixed