A Round-the-World Tour of Stock Market Internals

One of the "blunt instruments" we use to keep track of overbought and oversold conditions in stock markets is measure the percent of stocks in an index that are trading above their own 200-day moving average price. If an index has more than 80% of stocks trading above their own 200-day moving average price we consider than index overbought and if fewer than 20% of stocks are trading above their own 200-day moving average price we consider than index oversold.

In the below charts we simply display for all the major MSCI developed market country indices this overbought/oversold indicator. The two major points we'd make about these simple charts is that stocks in Euro area countries are generally near oversold conditions while stocks in the US remain near the overbought condition that has prevailed for the last 20 months.