80% of S&P 500 Stocks Above 50-Day Moving Averages

This morning on CNBC, Arthur Cashin mentioned a report we sent out yesterday to Bespoke Premium members that highlighted the percentage of stocks in the S&P 500 trading above their 50-day moving averages. Below we provide a one-year chart of the breadth indicator, showing that the current level is higher than it has been at any point in the last 365 days. While this is a sign of a healthy market, when it spikes to such high levels, it typically means a short-term selloff is in the cards.

click to enlarge

Below we highlight the stocks in the S&P 500 currently trading the furthest above their 50-day moving averages. As shown, Prologis (PLD) is the most overbought at 93%, followed by Office Depot (ODP), Lincoln National (LNC), SanDisk (SNDK), and Tesoro (TSO). These stocks have rallied significantly off of the November lows, and they could be in store for some mean reversion.

Comments

[BrucePile:]

The current reading of stocks above the 50 dma has to be viewed in the context of the non-typical gyration down since September. The 50 dma has been pulled down so far that it doesn't take that much of a barn burner climb to place a lot of stocks above it now. So the above curve may not indicate the over-rallied condition that it has in the past.

If you just look at the market index charts themselves, we've had a drop since September with rallies lasting little more than a week and a half within a wilting channel formation. That formation has been broken now to the upside. The first worthwhile bear rally may be beginning, dragging so many stocks above a smashed down 50 dma.

But the rise out of the channel could prove to be a brief spike with a return to what was being indicated before - another big leg down. It looks like kind of a technical pivot point for the market to me where you either want to ease into fast moving stocks to take advantage of what could be a powerful bear rally, or ease into more short positions to take advantage of a big leg down.

Or it may be best to ease into more cash to take advantage of more peace of mind.

Jan 07 01:55 PM

[happysoul77777:]

What does that mean? An overbought situation or a more powerful rally ahead?

Jan 07 04:53 PM

[sr9web:]

looks like a triple top - time to go short...

Jan 07 06:38 PM

[investor88:]

On balance seems time to short rather than long.

Jan 08 08:48 AM