May 9, 2012
Although the S&P 500 is down less than 5% from its bull market highs, the percentage of stocks that are oversold is really starting to pile up. Using a boundary of one standard deviation above or below the 50-day moving average as the threshold for being overbought or oversold, 49.4% of the stocks in the S&P 500 are now considered oversold, while just 19.0% of the stocks in the index are overbought. The chart below shows the daily percentage of S&P 500 stocks that are overbought and oversold. As shown in the chart, the current level of 49.4% is the highest percentage of oversold stocks in the index since 10/3/11.
