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The 14-day relative strength index (RSI) for the S&P 500 index of US large cap stocks has gone above the 80 mark for the first time in 20 years. Investment bank Morgan Stanley claims this is good.
‘While elevated sentiment metrics such as this may indicate increased near-term risks, history suggests it is bullish for the long-term,’ it comments.
Morgan Stanley has analysed data back to 1982 and finds the median price return for the S&P has been 11.9% six months after an RSI reading above 80; and 21% over a 12-month period.
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