Below is a look at our one-year trading range chart for the S&P 500. The dark blue line represents the index’s price, while the white line represents its 50-day moving average. The light blue shaded area represents the index’s normal trading range, which is one standard deviation above and below the 50-day. The red zone represents between one and two standard deviations above the 50-day, and any move into or above the red zone is considered “overbought.” The green zone represents between one and two standard deviations below the 50-day, and any move into or below the green zone is considered “oversold.”
As you can see in the chart below, the S&P just moved out of overbought territory back into the neutral zone for the first time in months. However, the index remains above its 50-day and within its long-term uptrend channel.
Below we provide one-year trading range charts of major stock market indices for 20 countries around the globe. Like the US, nearly all countries are trading in strong uptrend channels.
Countries that are in uptrends that have recently pulled back to the bottom of their uptrend channels include Canada, Brazil, Russia, Sweden, and the UK. If they can hold support here, they become attractive from a timing perspective.
Countries like Hong Kong, Malaysia, India, South Korea, Spain, and Taiwan are in uptrends as well, but they’re still at extreme overbought levels. It’s best to wait for some mean reversion to occur for these countries.
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