S&P 500 Technicals Show a Mixed Picture

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Includes: IVV, SPY
by: Bespoke Investment Group

Below we highlight some key charts for the S&P 500. The first one is our trading range chart that highlights if the index is overbought, oversold or neutral. As shown, the S&P 500 is right at the bottom of its normal range, which means it is currently one standard deviation below its 50-day moving average. While this isn't a flashing buy signal, it does mean that the risk/reward tradeoff favors the reward side much more than it does when the index is well into overbought territory.

The S&P 500 10-day advance/decline line measures the average daily number of advancers minus decliners over the last 10 days. The A/D line is a breadth measure that shows underlying strength or weakness in the movement of the market. Readers will notice that the A/D line recently moved to its highest levels of the year, even as the index just barely moved above its 50-day. While the extreme overbought reading is negative in the very short term, the underlying strength it shows is a positive when looking at a longer time horizon. Since the A/D line peaked a couple of weeks ago, it has moved back below zero and is close to oversold territory.

Currently, 34% of stocks in the S&P 500 are above their 50-day moving averages. While the 34% number is not telling us much at the moment, the fact that it failed to match its August lows after the most recent declines is a positive sign.

Finally, the current trailing 12-month P/E ratio of the S&P 500 is at 18.32. Unfortunately, this number is just as high now as it was when the market was making new highs a couple of months ago. This highlights that earnings have definitely slowed.