The S&P 500 is charging ahead with remarkable strength, and one technical indicator is flashing a loud message. The daily Relative Strength Index, or RSI, is now pushing close to 76. That level is extreme. When RSI climbs above 70, markets are typically considered overbought. At 76, the S&P 500 is deep into that territory.
This surge in RSI reflects how relentless the current rally has been. Buyers continue to pile in, seemingly unfazed by valuations, macro risks, or technical fatigue. The move has been powerful, but traders should be aware of what happens when momentum runs this hot.
An RSI reading this elevated can often act as a warning sign. It means the index has risen quickly and may need to cool off. Overbought does not mean crash, but it often means pause or pullback. In the past, RSI levels above 75 have preceded short-term consolidations, even in strong bull markets.
Still, bulls might argue this is a sign of strength, not a signal to run. In powerful uptrends, RSI can stay elevated for days or even weeks. That said, those chasing at these levels are playing with heat. One sharp reversal could wipe out days of gains in hours.
For investors watching from the sidelines, patience might be the smart play. Let the market come to you. For those already long, this is the time to review stops and consider trimming if your positions are extended.
Whether this is a last gasp or the beginning of another leg higher, the RSI is telling us one thing clearly, the S&P 500 is red hot.