Each morning in our Morning Lineup report for Bespoke Premium clients, we provide an update of the percentage of stocks in the S&P 500 that are overbought and oversold. Stocks are considered to be overbought whenever they are trading more than one standard deviation above their 50-day moving average, and they're oversold whenever they are one standard deviation below their 50-day.
Yesterday, the percentage of stocks that are currently oversold exceeded 50% for the first time since March 16th. As shown in the chart below, over the last year, prior spikes where the percentage of oversold stocks exceeded 50% led to at least short term rallies in the S&P 500. After five straight weeks of losses, bulls are hoping that history repeats itself.
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