Below we provide Bespoke trading range charts for the S&P 500 and ten sectors. In each chart, the white line represents the index’s 50-day moving average. The light blue shading represents the “normal” trading range, which is one standard deviation above and below the 50-DMA. The red zone represents between one and two standard deviations above the 50-DMA and is considered overbought territory, while the green zone represents between one and two standard deviations below the 50-DMA and is considered oversold territory.
For the S&P 500, the trading range has gotten extremely tight. We thought it was tight back in April and May, but it’s even tighter now. The current distance between the top end of the S&P’s normal range and the bottom end of its normal range is just 1.5%, so it doesn’t take a big move for the index to go from overbought to oversold or vice versa.
The S&P 500 is currently sitting below its 50-DMA, but it’s still within a long-term uptrend channel that has been in place since the February lows.
Looking at sectors, while Consumer Discretionary has been weak lately, it has still managed to hold above the bottom of its uptrend channel. The same can’t be said for Consumer Staples, which recently broke below its uptrend channel.
The Energy sector is trading within a tight slightly upward sloping channel, and it’s currently at the bottom of this channel trying to hold support. If it can hold, we should see a move back towards the top end of the channel soon. The Financial sector is sitting in somewhat of a no man’s land right now. It’s well above the bottom of its channel but has downside momentum.
Industrials and Health Care are both still trading inside of uptrend channels as well, and they’re currently closer to the bottom of their channels than the top. Materials has broken below the bottom of its uptrend channel, while Technology is the one and only sector that’s at the top end of its range. Both Telecom and Utilities broke their uptrend channels weeks ago and have now formed short-term downtrends.