One of the statistics that we like to look at to understand investor enthusiasm for a given sector is the percentage of stocks that are trading above their respective moving average over a variety of time slices (50-Day, 100-Day, 200-Day). When 80% of stocks or more are trading above their moving average we consider this to be at overbought levels. When 20% of stocks or less are trading above their moving average we consider this to be at oversold levels. When a sector is at extreme levels over multiple time slices this helps to confirm the overbought or oversold signal that we are witnessing.
The MSCI North American Industrial sector is currently at overbought levels over 50-days, 100-days and 200-days. Sectors can remain overbought for days, weeks or even months so this is not a timing tool. Rather it is a way to understand the dynamics currently underneath the surface of a sector's performance.
