While many indicators suggest the S&P 500 may be overbought, Ari Wald, Technical Analyst at Oppenheimer, argues that the longer-term advance should continue.
Wald points out that over 20% of Russell 3000 stocks are currently overbought (i.e. with a 14-day RSI reading of greater than 70), a level that has been achieved only 2% of the time since 1995. Rather than leading to the formation of a top, Wald says this has normally led to S&P returns that are slightly above average in the following 1, 3, 6 and 12 months (see Chart).
See previous article: When overbought is bullish