After Hitting Key RSI Levels, U.S. Markets Rest, Investors Lock in Gains

The market after hitting the 70 RSI last week turning down off Resistance.
By Robert New ,

Last week was a watershed moment for U.S. markets.

All three of the major indexes hit the 70+ relative strength index (RSI) reading, where over the years the market typically stalls from and resets for a period of time. Attentive investors knew this was coming. Daily RSI readings after hitting the 70+ level last week are now down to the 55-to-60 region. What does it all mean?

Lets first take a look at the S&P 500 ETF (SPY) - Get Report which hit a 2015 high-resistance area nearly on the button last week with a 70+ RSI tag. Since then, the index has been down for a fourth consecutive session:


Chart Composed by The Informed Trader courtesy of Stockcharts.

The combination of horizontal resistance and 70+ RSI caught the top, thus we at The Informed Trader moved most of our exposure back to cash the past week after we hit 70 on RSI. What we are looking for is a reset in the elevated oscillators before re-positioning. Supports on the S&P 500 run from our 20/50 exponential moving averages (EMA) area between the 2,020 and 2,060 region, so we want to see how that region gets handled.

Next, lets turn our attention to the Nasdaq.  Similarly to the S&P 500 the Nasdaq, after a decent recent run, stalled out off a 70+ RSI tag on the move up last week:


Chart Composed by The Informed Trader courtesy of Stockcharts.

We are looking for decent support near the 5,000 gap and 20 EMA region, which align well with the 50 EMA down near 4,932 currently.  

After a decent upside advance, the market is taking a well-deserved breather the past few trading sessions. Lets see if the S&P 500 and and Nasdaq support areas catch this move as our oscillators start to unwind last week's overbought condition.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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