Over 69% of S&P 500 Stocks Are Overbought

jamesmith

Over 69% of S&P 500 Stocks Are Overbought
TUESDAY, OCTOBER 5, 2010 AT 05:00PM
The chart below is from page two of our Daily Morning Lineup, which is emailed out to Premium clients each morning before the open.  In the chart we plot the percentage of S&P 500 stocks that are overbought (red line) and oversold (green line) on a daily basis.  A stock becomes overbought or oversold when it is trading more than one standard deviation above or below its 50-day moving average.

As shown, with 69.8% (349) of the stocks in the S&P 500 currently trading more than one standard deviation above their 50-day moving averages, there are more overbought stocks now than at any other time since April 23rd, which coincidentally was the closing high for the year.  While this may sound ominous, we would note that the percentage of overbought stocks has gotten as high as 77.6% (4/9/10) this year.  Furthermore, back on 4/23 the percentage of overbought stocks was actually on the decline, while for now at least the percentage of stocks reaching overbought levels is still rising.