Below we highlight our trading range charts for the S&P 500 and its ten sectors. In each chart, the blue shading represents between one standard deviations above and below the 50-day moving average. The red shading represents between one and two standard deviations above the 50-day moving average, and vice versa for the green shading. Moves into or above the red shading are considered overbought, while moves into or below the green shading are considered oversold.
After very briefly moving into overbought territory a couple of weeks ago, the S&P 500 has now broken below its 50-day and is getting close to oversold territory. The Financial sector is leading the overall market lower and is now back below its June lows. As shown in the first of the sector charts, the Financial sector is currently at the bottom of its green shading, which means it is two standard deviations below its 50-day. Will the sector get an oversold bounce soon?
Health Care, Telecom and Industrials are three other sectors that have struggled recently. Health Care and Telecom are both in extreme oversold territory, while the Industrials sector isn't far off. Technology, Consumer Discretionary, Energy and Materials are the four sectors that remain above their 50-day moving averages. If you're a relative strength trader, the place to be is in these four sectors right now.
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