In today’s daily market outlook we examined the S&P 500’s short term overbought conditions.
Whenever the S&P 500’s hourly RSI has become this overbought in the current correction, it always made a pullback or consolidation.
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The stock market’s recent price action is strong, which suggests that a sideways consolidation is more likely than a pullback. The S&P 500 has gone up more than 0.8% each day over the past 3 days.
When this occurs for the first time in half a year while the S&P is above its 200 daily moving average, the stock market’s downside over the next week is limited.
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As you can see, the stock market tends to go up in the next week when it goes up >0.8% 3 days in a row. In the historical cases that the S&P went down, it only went down a little bit in the next week.
With hourly RSI very overbought, this suggests that the stock market will make a short term consolidation before powering higher.
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