S&P 500 Overbought, Not Overwhelmed as Bulls Shrug Off Charts
- Spread between S&P 500 and 200-DMA widest since July 2014
- Multiple measures of market worry stay low relative to history
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The S&P 500 Index hasn’t been this overextended in 2 1/2 years, according to one technical measure, yet investors are showing few signs of worry. Hedging costs are near the lowest since July 2014, the options market has seen record call volume, and short interest sits below its one-year average.
“Overbought doesn’t mean over,” MKM Partners technical analyst Jonathan Krinsky wrote in a Dec. 11 note. “It is hard not to be the contrarian here. Yet history suggests that in strong uptrends, extreme overbought conditions and bullish sentiment are not always sell signals. Both can remain that way for months, if not quarters, before a meaningful top.”