We're Watching RSI Levels for 2 of Our Larger Holdings

The market melt-up ahead of the Fed’s policy meeting continues, with the Nasdaq Composite inching deeper into overbought territory and the S&P 500 knocking on that door based on its current RSI reading.

We often say that we “don’t buy the market,” but we have to be aware of its mood and investor mindset. While the Volatility Index (VIX) has crept up, perhaps because others have joined us in thinking Wednesday’s Fed news could be a “buy the rumor, sell the news” event, the Fear & Greed index has crossed back into “Greed” mode.

When we look at the Pro Portfolio’s holdings and their current RSI readings, only two are above 70, which signals an overbought condition. The first, as you can see below, is Alphabet GOOGL, and that condition has only intensified after we took some very profitable chips off the table last week.

The other position with an RSI above 70 is Morgan Stanley MS, which has benefited from the upswell in IPO activity that should drive the investment banking segment, and the corresponding bottom-line leverage it's known for. What’s interesting is that shares of other big banks with a meaningful investment banking arm, such as Goldman Sachs GS and JPMorgan Chase JPM, are not yet overbought. They are close, but so far, their RSI levels remain below 70.

This week brings the IPO of cybersecurity company Netskope (NTSK), which is expected to price 7.17 million shares between $15-$17. Morgan Stanley is one of the lead underwriters on that offering. Morgan Stanley is also one of the lead banks on the Waterbridge Infrastructure (WBI) IPO, which targets a $17-$20 pricing on ~27 million shares.

Then there's StubHub’s (STUB) IPO, which is expected to price 34 million shares between $22-$25. Today, it’s being reported that the offering isn’t seeing any price sensitivity, which suggests it could join the growing list of recently priced offerings that cleared the expected pricing range. That would be a positive for Bank of America BAC.

When we have the final pricing, we will revisit our MS and BAC price targets to reflect those transactions, but also the improving outlook for the larger IPO and M&A markets.

Before that happens, however, if we see MS shares chug higher and its RSI reading does the same, we may elect to trim the position size back to around 4%, essentially repeating the move we made with GOOGL shares last week.

If GOOGL shares move meaningfully higher or if the S&P 500 moves into overbought territory, we may dial that position size back to 4% as well.

We also have a few other holdings in the Pro Portfolio that have followed the market higher, crossing the 4% position size threshold in the process. However, none of their RSI levels have them in overbought territory.

United Rentals URI: 58.44

Bank of America BAC: 64.48

Eaton ETN: 67.09

Nvidia NVDA: 54.15

More Pro Portfolio:

At the time of publication, TheStreet Pro Portfolio was long GOOGL, MS, BAC, URI, ETN and NVDA.