Futures are down again this morning as global equities sell-off in the wake of yesterday’s brutal day in the US. Traders are in no mood to take a stand right now as the uncertainties regarding China and Iran take center stage. The flight to safety has provided a big boost for treasuries, re-flattening the yield curve closer to the inversion zone. And to think, just three trading days ago, the S&P 500 was flirting with a record high close! Change happens fast!
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Each morning on page two of the Morning Lineup, we show the daily percentage of S&P 500 stocks trading at overbought and oversold levels over the last year. In the chart below, we combine those two series to show the daily reading on a net basis. After reaching extreme negative levels back in late December, this indicator saw a sharp rebound at the turn of the calendar and has basically been in positive territory for most of this year. Following yesterday’s shellacking in the market, though, the net percentage of overbought stocks turned negative for the first time since mid-January. While there may have been short-term froth in prices heading into this week, the rekindling of Chinese trade issues as well as geopolitical issues bubbling up in the Middle-East, has been more enough to settle sentiment down in the short-term.
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