Equity markets have struggled since hitting highs a couple of weeks ago. Today’s move lower left the S&P 500 right at the bottom of its normal trading range, and five of the ten major sectors are now oversold. These five oversold sectors are Consumer Discretionary, Consumer Staples, Health Care, Industrials and Utilities. The only two sectors that remain above their 50-day moving averages are Energy and Materials. When was the last time you could say that?
While the last week has been painful for market bulls, we’re really just stuck in a sideways market right now. As you can see in the trading range chart of the S&P 500 below, the index has basically been back and forth for the last three months. Now it’s just a question of which direction we’ll head when this sideways pattern eventually breaks. A couple of weeks ago it looked like we were ready to get a break to the upside. Now it’s looking like we could get a break to the downside.
Breadth has dipped significantly for the market. As of today, just 35.4% of the stocks in the S&P 500 are trading above their 50-day moving averages. The only sectors with more than 50% of their stocks above their 50-days are Materials and Energy, with Energy far and away the strongest at 80.5%. Just 3.3% of Utilities stocks are above their 50-days, while Health Care and Consumer Discretionary have readings just under 25%. A few months ago Consumer Discretionary was benefiting from weakness in Energy, but now the opposite is occurring as oil prices head higher.