Here’s a chart that Bespoke Investment has drawn up.
Bespoke says:
The percentage of stocks in the S&P 500 now trading above their 50-day moving averages is down to 4%. At the March 2009 lows, the reading only got down to 5%, so that gives investors a good idea of just how extreme this decline has got.
The market has seen seven consecutive days of decline and is now 16% below its high. That’s very close to bear market territory. David Rosenberg says the forward P/E based on consensus earnings estimates is only 12.5x earnings. Clearly, the market is oversold. All of these are extreme negative but contrarian indicators of course. The contrarian in me sees this as bullish.
However, the market has confirmed its breakdown below its 200-day moving average decisively. Fair value is probably more like 900 than the present 1022 on the S&P 500. And on a fundamental basis, some indicators are almost flashing double dip.
Technicals are saying oversold while fundamentals are saying more to come. Which is it?
Source: Percentage of S&P 500 Stocks Above 50-Days Down to 4% – Bespoke