After such a torrid bull run this summer and with most major averages posting double digit gains, stocks finished lower this week, albeit modestly. For the week the Dow Jones Industrial Average (chart) closed down 0.10%, the Nasdaq (chart) -0.13%, the S&P 500 (chart) -0.13% and the Russell 2000 (chart) finished the week off 1.06%. This minor pullback is nothing compared to the rare and impressive September monthly gains with all of the above key indices advancing well over 3% so far this month.
As equities continue to remain strong after the Fed announced their latest stimulus package last week, I continue to monitor the underlying technicals of the markets and from what I see, the coast continues to remain clear. The one exception to how the big four is looking technically is that these key averages are at or near the 70 value level on the Relative Strength Index (RSI). The RSI is a technical analysis indicator which measures gain and losses over a given period of time to identify whether or not stocks or indexes are currently oversold or in this case overbought.
That said, with central banks from around the world ready to flood the markets and economies with liquitidy if needed, I am now of the belief that stocks and certain commodities should remain overbought for the foreseeable future with the occasional pullbacks along the way. Good luck to all.
Have a great weekend 🙂