Footsie looks overbought

I am getting the general feeling that many are thinking that large-caps are likely to be the strongest performing index over the next year. Over the last 5 years, the MCX (FTSE 250) is up 110%, compared with the UKX (FTSE 100) of “only” 60%. That’s an average return of 9.9% pa for the Footsie, coming off a very low period for stocks.

A note of caution, though … Stockopedia is showing that the UKX is now within kissing distance of being overbought (http://is.gd/xVmHtU). You can also see from the chart that if you had bought when the RSI showed oversold, and sold when it showed overbought, then you would have done better than just buying and holding.

That doesn’t mean that the strategy will work in future, of course. However, I’m also hearing the word “correction” and “rolling top” a lot lately. That would seem like the kind of market for in-and-out trading.

BWTFDIK

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About mcturra2000

Computer programmer living in Scotland.
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