Developed Market Stocks Are Down, But Far From Oversold

With stocks around the world selling off pretty much in tandem over the last week we thought we'd review what our indicators of market breadth are telling us at the moment. In a nutshell, even though most markets suffered 2-3% losses last week, global stocks in general are far from being oversold. As always, we are working with the roughly 1600 stocks in the MSCI World Index in our analysis.

We'll start with a blunt tool showing the percent of stocks that are trading above their 200-day moving average. This reading still shows 64% of stocks trading above their 200-day moving average. Good oversold readings will see only 20-30% of stocks trading above their 200-day moving average.



The percent of stocks making new 200-day lows in price currently stands at 2% relative to good oversold levels that are typically in the 8-30% range.



The number of advancing stocks (averaged daily over the last 200 days) shows a reading of 61 compared to levels well under zero at decent oversold instances.



The 1-quarter cumulative number of 5% down moves in individual stocks (a measure of selling pressure) is currently only 359. The best times to buy stocks over the last 4 years have been when this indicator is greater than 1000.



Finally, and maybe the most convincing of all the above indicators, is an analysis of the percent of stocks that are making new 200-day highs in volume. We saw only 2% of stocks make a new high in volume on last Friday's selloff (not very emotional). At emotional lows we usually look for at least 10% of stocks to register 200-day highs in volume.