Gavekal Capital: MSCI North America Is Overbought....Again

Thursday, August 21, 2014

MSCI North America Is Overbought....Again

It sure didn't take long for stocks in North America to snap back into overbought territory once again. The number of stocks that are trading above their 200-day moving average hit a six month low on August 7th at at relatively still elevated level of 59%. In just two short weeks, the number of stocks trading above their 200-day moving average has rocketed back up to 77%. We are now three years out from the last reading of a truly oversold market according to this metric. In contrast, even with a slight bounce, MSCI Europe is approaching oversold status for the first time since 2012.

Digging into the sectors, we see that the most impressive reversal has been in the Consumer Staples Sector. Two weeks ago only 50% of stocks were trading above their 200-day moving average. As of yesterday, this stands at an overbought level of 80%. The Utilities sector also had an amazing reversal, however, there are only 37 companies that make up this sector so it's extremely volatile. The Consumer Discretionary sector, Industrial sector, and the Financial sector also had impressive snapbacks.

The Health Care sector remains the strongest in terms of breadth of the 10 sectors. 88% of stocks are trading above their 200-day moving average.

Last and in this case the least interesting, the Materials sector and Telecom sector charts.

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