Futures are still indicating a positive open, but the degree of gains has been shrinking all morning ahead of a heavy dose of economic data. Trade tensions are once again in the headlines, and today’s economic data is unlikely to move things much in either direction as there were no major surprises. The revision to GDP was slightly stronger than expected, Core PCE and the GDP Price Index were weaker than expected, Jobless Claims were pretty much right in line, and Wholesale Inventories rose more than expected.
Make sure to check out today’s Morning Lineup for our analysis of the stealth rally we have seen in EM over the last few days along with our contrarian take on how the relevance of these non-stop trade headlines may be reaching a peak.
Even with the S&P 500 closing off its intraday lows yesterday, the market is approaching some levels that can be considered extreme in the short-run. For starters, the S&P 500 finished the day yesterday 1.998 standard deviations below its 50-DMA. For the sake of reference, we consider anything more than one standard deviation below the 50-DMA oversold, while two standard deviations is considered an extreme. We did see more extreme oversold levels last year in Q4 but that was a hardly the run of the mill decline.
In terms of the S&P 500’s individual components, the number of oversold stocks is starting to pile up. As of yesterday’s close, 10.4% of the stocks in the index were overbought (more than one standard deviation above their 50-DMA) while just under half (49.2%) were oversold. At a net reading of -38.8%, there haven’t been this many oversold stocks in the S&P 500 since January 3rd when over 70% of the stocks in the S&P 500 were oversold.
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