Sizing up the U.S. stock market rally

The average stock in the S&P 500 has now fallen 4.34% since the index made an all-time closing high on May 21st. Even with the sell-off we have seen, however, the S&P has yet to break below its 50-day moving average, and the index is still within its long-term uptrend channel. As shown below, however, we’re now right at the bottom of the uptrend channel, so the next few days will be a key test for this bull market.

Trading Range

After today’s sell-off, not one of the ten S&P 500 sectors remains in overbought territory. Last week at this time, the S&P 500 as a whole and seven of ten sectors were overbought, but all overbought levels have now been worked off. Three sectors are now oversold — Consumer Staples, Telecom and Utilities.


Of the 30 Dow Jones Industrial Average stocks, eight stocks remain in overbought territory, but there are now more stocks in the index that are oversold (9) than overbought (8). McDonald’s (MCD) is the most oversold, while AT&T (T) and Travelers (TRV) are not far behind.