Does an Overbought S&P 500 Index Matter???

We have stated several times in recent days that the broad stock market is overbought. However, we have not shown WHY we believe this to be true. Our apologies. Here is a chart that supports our case:

The S&P 500 Index has only been more overbought…based on its weekly RSI chart…one other time since the credit crisis. That was in early 2018. (Again, that was in EARLY 2018…just before a 10% correction…not just before the deeper correction later in 2018. The market is actually more overbought today than it was just before that second (deeper) 2018 correction…that took place during the 4th quarter of that year.)

Yes, it HAS been JUST AS overbought as it is now on three other occasions…in 2010, 2011 & 2013, but it has only become more overbought one other time (in early 2018). Those other 3 occasions when the S&P became similarly overbought were followed by declines of 7%, 17% and 19%.

Of course, it could become even more overbought…just like it did that one time in early 2018. In fact, the S&P was able to rally another 10% back then…AFTER the weekly RSI reached the level it stands today. So there is certainly no guarantee that the market will not rally further over the coming weeks. We’re merely pointing out that the broad market’s technical condition is getting quite stretched. Therefore, we’re going to have to see the kind of rally that we’ve only seen one other time in the last decade in order for the market to rally in a significant way from current levels.

To see comments like this on a daily basis, please click here to subscribe to "The Maley Report" ( Thank you very much.

Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Jan 09, 2020 — 11:01 AM
Comments ({[comments.length]})
Sort By:
Loading Comments
No comments. Break the ice and be the first!
Error loading comments Click here to retry
No comments found matching this filter
  • {[]} — Marketfy Staff — Maven — Member
Want to add a comment? Take me to the new comment box!