The SP500 index based on the weekly price bar chart is showing that the weekly RSI (Relative Strength Index) is about to enter the power zone. The power zone is the area above the 70th percentile line in the RSI indicator window.
The RSI entering above the 70 line is usually a very bullish indication especially when dealing with the longer term charts.
So this could mean that the market still has more juice left in it to the upside. The last time the SP500 broke above the 70 line RSI on the weekly basis was was back in December 2003, but also in May of 2007 and November of 2006.
The most meaningful comparison is the 2003 period in my opinion because this was the major recovery rally from the 3 year bear market into 2002-2003.
So it would appear that still the bulls are in total control here. Overbought will stay overbought for a while still and when the correction finally does come it will probably be sloppy and have limited easy of movement to the downside.
Trying to pick a top in this market is an extremely dangerous affair especially when you consider how strong the bull trend is with the weekly RSI about to enter the ‘red zone’ area above 70.
A break into and above the 70 range of course is not guaranteed, but given the recent strength in the market it is hard to see a different outcome at this point.