The PPS turned down today after reaching the top of the Target zone. Despite the sell-off, the pullback held above the axis line (drawn across the October high on a closing basis) and the lower channel line (demand line). There was definitely a loss of momentum, but no overtly bearish volume on the downwave. As for the RSI, it’s a worthless indicator because of its tendency to remain overbought or oversold for lengthy periods – especially on the heels of a squeeze breakout. Take a look at the S & P 500:
It has been overbought for well over a month. I mainly use the RSI to identify trend changes via trendline breaks as depicted in the first chart above.
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