On the brink…

Dow 12000 and S&P 500 1,300? These 2 major indexes are on the verge of breaking through these key psychological levels and who knows how much further they could go? In my previous blog I eluded to a key technical metric which certain professional traders and investors look to, and that is the RSI indicator. The Relative Strength Index or RSI is a metric that can provide insight as to whether markets or equities are overbought or oversold. The Dow Jones RSI value is now hovering around 80, which is definitely in an overbought mode at least according to the RSI value. However, as we all should know by now equities or indexes can remain overbought or oversold for extended periods of time. Let’s break down the analysis a little further pertaining to the RSI. Some market technicians look for the trend-line to not only breakthrough and cross the 70 level on the RSI chart, they look for a break of the 50 value level before they choose to sell or short. It’s the opposite in an oversold condition in whereas the trader or investor looks for a cross above the 30 level and then a subsequent cross above the 50 value level before they cover their shorts or go long.

For now it seems that these markets are going to continue to extend and expecially as I review the results of the Qualcomm (NasdaqGS: QCOM) earnings after the close in which the company reported record first quarter results while raising fiscal 2011 guidance. This should bode well for the tech sector tomorrow.

Have a good evening.