Many technical analysts on the Street are highlighting the risk of a pullback for equities given short-term technical indicators have moved into overbought territory.

The mistake here, in my opinion, is obsessing over short-term trading indicators when there is a much bigger bullish trend just getting underway. In other words, don’t lose sight of the forest, or the longer-term bullish market cycle, for the trees, the shorterterm noise emanating from the media and Twitterati. The key point is that in strong uptrends, which I see developing here, trading indicators can stay overbought for extended periods, leaving investors who don’t participate staring at the back of the train as it leaves the station.

The chart below illustrates the Standard & Poor’s 500 index price in the top panel and its short-term 14-day relative strength index (RSI) momentum in the bottom. There are two important points both traders and investors should consider. First, the S&P is in the early stages of breaking out of a broad trading range dating back to the middle of 2018 and arguably back to Q1 2018.

Second, after the 5% or so surge in October into November, it’s not surprising to see the daily RSI momentum in the bottom panel become overbought. But should you follow the gloomy h...

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