The U.S. stock market (S&P 500) has become overbought for the first time in a long time. It’s 14 daily RSI has reached 70 for the first time since late-January 2018 while it remains above its 200 daily moving average.

In other words, momentum has returned to the stock market.

When momentum returns to the stock market, its forward returns over the next year are very bullish. Don’t turn bearish just because the stock market is overbought.

Here’s what happens next to the S&P when its RSI exceeds 70 for the first time in 7 months, while being above its 200 daily moving average (i.e. in an uptrend).

Click here to download the data in Excel.

Conclusion

Momentum has returned to the U.S. stock market. Contrary to popular belief, this IS NOT a bearish sign for the stock market. It is bullish on a short term, medium term, and long term basis.

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By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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