Pennsylvania Trust

Breadth or Depth? Relative Strength Indicators Suggest Industrials, Utilities and Tech May Be Overvalued

Breadth or Depth? Relative Strength Indicators Suggest Industrials, Utilities and Tech May Be Overvalued

As we head into today’s close, the S&P 500 Index breached the “overbought” level of 70 on an intraday basis, according to its 14-day relative strength index.

This is a level not seen since August.

The last time we saw 25% of the market above an RSI of 70 was in February of 2018.

This 25% >70 number seems to be a reliable indicator of the market sentiment and resistance.

But investors who look just at sectors or individual names will be hard pressed to find a similar situation. At the sector level, only industrials, utilities and tech have a large component over a 14-day RSI of 70.

These three sectors are also the only three trading as an aggregate above a 70 RSI number.

As far as absolute, none of the GICS sectors are.


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