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Below is a look at our trading range chart for the S&P 500 over the last year.  The red zone represents what we call “overbought” territory, which is calculated as between one and two standard deviations above the index’s 50-day moving average.  As shown, the index moved into overbought territory in March, and it has stayed there since.  Even after the market’s pullback over the last few days, prices remain elevated.  Overbought levels can be worked off in one of two ways: prices can decline back into neutral territory, or prices can trend sideways and allow neutral territory to catch up with it.  Bulls will be hoping for the latter in the days ahead.

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Market internals like the percentage of stocks above their 50-day moving averages in the S&P 500 remain elevated as well.  As shown below, 88% of stocks in the index remain above their 50-days.

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