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Percentage of Oversold Stocks Exceeds 50%

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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Reader Comments (1)

What would be interesting is to extend this data back to 2007 to see how stocks behaved during the crash and to what extremes they were over bought.

June 7, 2011 | Unregistered Commenteranonymous

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