As the SPX rallies to a fresh record today on better macro globally and a continuation of a cyclically rally that is encouraging higher rates, technicals are saying be cautious with the extreme level of optimism.
A look back on the SPX over 10 years illustrates we have not been this high on a 9d RSI (85.7) for the index since March 2010 when the SPX hit 86.08 on March 17th .
Ultimately March 17th was a top in market momentum that ushered in a reversal that was quick and sharp. The SPX pulled back from March 17th a bit before rallying to almost 83 9d RSI on April 14. That high signaled an important trading inflection point where the index then proceeded to head into a vicious -17% tailspin over 47 sessions, eventually bottoming on July 2, 2010.
Investors may argue that the conditions for this rally are very different with both synchronized macro growth and looming fiscal policy support. We would simply caution that these levels of optimism are at extreme levels and can argue that there are a handful of major negative catalysts that might force volatile price action from these lofty levels.