As The Stock Market Rises, The Foundation Is Cracking – Investing.com

As The Stock Market Rises, The Foundation Is Cracking – Investing.com

It was an uneventful options expiration day, with the finishing up 35 bps and the Invesco QQQ Trust (NASDAQ:) 'Qs' finishing flat. Meanwhile, the was flat while the fell, and the SPDR® S&P Biotech ETF (NYSE:) was smashed again. The market was indeed making little sense.

The S&P 500 remained overbought on an RSI basis, and I'm saying it because I think the index is overbought; I am saying it because the index is actually overbought. The RSI was at 74.5 and above an overbought level of 70. Does it mean that the index has to fall sharply in this instant? No. The RSI rose to over 80 in September, and it rose to almost 90 in January 2018. So by some measures, the index can grow even more overbought.

So what does it mean? Well, it means there is a pretty good chance of a very sharp correction. Certainly, we could see a drop of 12% as seen in January 2018 or a more than 10% drop in September 2020. Or we could have nothing really happen like in January 2020, even though the bottom did eventually fall out a month later.

We use indicators to tell us the