Highest Number of Oversold Stocks Since October (Bespoke)

Fol­low­ing today's sell-off in the equity mar­ket, there are now 226 stocks in the S&P 500 that are cur­rently in over­sold ter­ri­tory (more than one stan­dard devi­a­tion below 50-day mov­ing aver­age). On a per­cent­age basis, this works out to 45.2% of the stocks in the index. The last time there were more over­sold stocks in the S&P 500 was back on Octo­ber 4th.

Granted, the cur­rent sell-off hasn't been nearly as bad as the one we saw last Sep­tem­ber (yet), but because of the lack of volatil­ity in the mar­ket over the last sev­eral months, the trad­ing range for indi­vid­ual stocks became much nar­rower lead­ing up to the cur­rent sell-off. There­fore, it didn't take as big of a sell-off to move the mar­ket and indi­vid­ual stocks into over­sold levels.

To illus­trate this, let's use the S&P 500 as an exam­ple. The chart below shows the price of the S&P 500 along with its trad­ing range of one stan­dard devi­a­tion above and below its 50-day mov­ing aver­age (gray region). In the lower chart we show the size of the trad­ing range in per­cent­age points from top to bot­tom. Back in early Octo­ber, the mar­ket was sig­nif­i­cantly more volatile than it is today. As a result, the size of the S&P 500's trad­ing range was above 9% and com­ing down from as high as 12.5%. Today, after months of a rel­a­tively placid mar­ket envi­ron­ment, the size of the S&P 500's trad­ing range from top to bot­tom is 4.14%, or less than half of what it was then.