U.S. Equities are in Overbought Territory and Vulnerable to a Large Correction

U.S. equities have been making new highs almost daily and 2013 is clearly shaping up as one of the strongest bull markets of recent market history. But how dangerous is this market for investors looking to commit new capital?

The chart below shows the 15-year performance of the Fidelity Spartan U.S. Equity Index Fund (FUSEX) using monthly bars. This long-term chart shows that the great bull market of 2013 is still intact and has advanced without any serious interruption since December 2012.

However, a closer look at the RSI indicator (a technical indicator that measures overbought/oversold conditions) on the top of the chart shows an overbought condition. While the bull market can continue its positive momentum for weeks or months, U.S. equities are increasingly vulnerable to a serious correction or even a crash.

fusex

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

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One thought on “U.S. Equities are in Overbought Territory and Vulnerable to a Large Correction

  1. Pingback: Best Fidelity Funds for 2014 – Part 5: International Diversification (final part) | Fidelity Trends

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