Below is a look at our trading range charts for the S&P 500 and its 10 sectors. In each chart, the blue shading represents the sector's "normal" trading range, which is between one standard deviation above and below its 50-day moving average (white line). The red zone represents between one and two standard deviations above the 50-day, and vice versa for the green zone. Moves into or above the red zone are considered "overbought," while moves into or below the green zone are considered "oversold."
As shown, the S&P 500 has pretty much been trading in overbought territory all year now, and the index is currently at its most overbought levels in more than a year. Stocks and indices can stay overbought for a long time, but historically they have not remained as extended as the S&P is now for too long. We would expect some sort of cool down in the coming days.
Nine out of 10 sectors are currently overbought as well, with Utilities the one lone holdout. Utilities had been one of the big outperformers up until recently, but the shift out of defensives and into the more cyclical areas of the market has seen the Utilities sector move down to its 50-day. While nine of 10 sectors are overbought, seven of 10 are actually two or more standard deviations above their 50-days (similar to the S&P 500 as a whole). Financials, Industrials, Healthcare, and Consumer Discretionary are the most extended, and they've all been on remarkable runs for pretty much the last 12 months. Interestingly, the Technology sector, while overbought, has yet to take out its September high. Apple (AAPL) remains the main cause of this.