We’re entering the back half of December, which is one of the slowest times of the year in terms of market trading volume. And lower volume means higher volatility, as just a few traders can move a stock sharply if there’s no one around for the counter trade. That means this is no time to be complacent — especially when a key stock market indicator is signaling potential trouble. The Relative Strength Index (RSI), which helps investors determine whether the market is undervalued or overvalued in the near-term, is sending a clear signal: the market… Read More
We’re entering the back half of December, which is one of the slowest times of the year in terms of market trading volume. And lower volume means higher volatility, as just a few traders can move a stock sharply if there’s no one around for the counter trade. That means this is no time to be complacent — especially when a key stock market indicator is signaling potential trouble. The Relative Strength Index (RSI), which helps investors determine whether the market is undervalued or overvalued in the near-term, is sending a clear signal: the market is sharply overbought. The RSI compares recent gains with recent losses, dividing the trading days with gains by trading days with losses, and also accounts for the magnitude of those moves. [See our definition in InvestingAnswers.com for more] After an extended period of mostly losing sessions, the RSI will slump, sometime below 30, which is used by many as a clear buying signal (also known as when the market is “oversold”). And when the market is steadily rising, this index moves well higher, and investors generally become concerned that we’re… Read More