After closing at overbought levels on Thursday afternoon, the bottom has fallen out of US equities. What makes the moves even more extraordinary is that the move in US equities has been tame compared to what we have seen in other global markets. Through Monday’s close, the S&P 500 is now more than three standard deviations below its 50-DMA and at its most oversold level since January. The graphic to the right shows the current levels of the S&P 500 and each of its ten sectors relative to their 50-DMA. Along with the S&P 500, four sectors (Consumer Discretionary, Financials, Industrials, and Materials) are also trading more than three standard deviations below their 50-DMAs. At the same time, Telecom Service and Utilities are trading at overbought levels!
As you might guess, with the market so oversold, plenty of stocks are trading at oversold levels as well. In fact, 295 stocks in the S&P 500 closed in oversold territory on Monday, which is the highest reading since 2/11 and up from just 36 on Thursday’s close. To put that increase in perspective, going back to 2007, there hasn’t been a single time where the number of oversold stocks increased by that much in the span of two trading days! Finally, among those 295 oversold stocks in the S&P 500, 15 closed four or more standard deviations below their 50-DMAs on Monday (see table below). To put that in perspective, it’s pretty uncommon to see one stock trading at that oversold of a level let alone 15!