Our popular Trend Analyzer tool is a very helpful way for Bespoke members to monitor overbought and oversold levels for large baskets of stocks or ETFs across asset classes. Below is a snapshot of major US index ETFs from our Trend Analyzer tool as of this morning.
When looking at the Trend Analyzer’s “Trading Range” section (far right of snapshot), the dot for each stock or ETF represents where its share price is currently trading relative to its 50-day moving average (DMA). In the snapshot below, the 50-DMA for each ticker is represented by the vertical black line in the middle of the trading range. Price is below the 50-DMA when it is to the left of the 50-DMA line and above the 50-DMA when it is to the right of the black line. Additionally, the tail for each ticker in the Trading Range section shows where the stock or ETF was relative to its range one week ago. So when the dot is to the left of the tail, it means price moved lower within its trading range over the last week. When the dot is to the right of the tail, it means price moved higher within its trading range over the last week.
Long tails mean price moved a lot over the last week on a relative basis, while short tails indicate little price movement. In today’s snapshot of US index ETFs, you can see that all of them have long tails with price moving lower over the last week. This highlights the significant downside mean reversion that US equities have experienced recently. In early September, pretty much everywhere you looked, prices were very overbought (extended well above their 50-day moving average). Over the last week or so, however, as equities have sold off they’re now trading at more neutral levels within their trading ranges.
When looking for an entry point or exit point on a position, it’s useful to take overbought or oversold levels into account. We use our “Timing” score within the Trend Analyzer to help members identify attractive (or unattractive) set ups. Members looking to add a new position or add to an existing position like to do so when price is trading at neutral or oversold levels as opposed to placing a bid when price is extremely overbought.
Looking at US sector ETFs, our Trend Analyzer shows that all of them have moved lower within their trading ranges over the past week, which gives them “Good” timing scores as opposed to the “Poor” timing scores these same ETFs had when they were trading at extreme overbought levels a few weeks ago.
The Energy sector (XLE) is the main outlier here with an extreme oversold reading. While every other sector is either neutral or overbought (Materials), Energy just can’t seem to get out of its own way this year. The sector entered today down 7.5% over the last week, 10.84% below its 50-day moving average, and down 43.7% year-to-date.
Finally, below is a snapshot of the stocks that make of the NYSE FANG+ index run through our Trend Analyzer. Similar to what we’ve seen around the rest of the US equity space recently, all of the FANG+ stocks are down significantly over the last week (8 of 10 down 10%+), and this has caused most of them to move out of overbought territory and back into neutral territory. For those that have been waiting for a pullback in these names to add exposure, now you’ve gotten it. Click here to start a free trial to Bespoke Premium and immediately gain access to our Trend Analyzer tool.