If the market does rally into year end, the question becomes: when do we get in?
The current sell-off has likely shaken the confidence of many weak hands. But a look at recent history shows us we may soon have a good buying opportunity. During long-term uptrends the Relative Strength Indicator (RSI) provides a useful tool in knowing when to “buy a dip.”
Here’s a chart of the S&P500 futures going back to 2010.
As you can see, in the past three years, the RSI has given three buy signals on the S&P500. The strategy is simple. Buy when the RSI hits “oversold” territory (green on lower chart), then sell when it moves to “overbought” (red).
These three trades alone netted 15%, 14% and 9% winners. Trading just one futures contract on the S&P500 (which requires about $5,000 in margin) would have turned a total profit of a little more than $20,800.
I’m talking about this now because we may soon have another RSI buying opportunity. If you look at the RSI subgraph you’ll see the current sell-off has brought the indicator’s value down below 40. If it moves below 30, I’ll have good reason to believe the sell-off is over and prices should turn higher just as they have the past three times the RSI hit this level.
We should know more next week – stay tuned.
If you haven’t done so already read the Survive & Prosper issue on “November 6 Will Make NO Difference: Stock Bubble Crash is Cominged”
Recent Articles by
Harry Dent, one of the most respected economists in the industry, has uncovered a disturbing market event that could soon devastate millions of investors. In short, he has undeniable proof that one of the market’s safest and most popular investments is about to get slaughtered… and it will have dire consequences for those who don’t prepare right away.
For full details on the event Harry’s dubbed as the “Safe-Asset Slaughter”… and to ensure you escape the coming carnage, I urge you to watch this special presentation.