Still Not Overbought

We wanted to update readers on ChartLabPro’s countertrend reading for the S&P 500.  We are currently reading an Approaching Overbought S&P 500 and yet to reach overbought.  10 out of the last 13 Approaching Overbought markets have researched an Overbought level.

We reviewed the most overbought markets in the last 18 years, and here is what we came up with. First, for a reference point, our countertrend reads a maximum -1. Since we have been using our this measure, we have never seen a -1. We typically reduce long exposure at a reading of -.72 if our buy rating remains. You can see from the chart below we first signaled a strong buy rating at 1,418 and never deviated from that signal until 1,666. additionally, we had our second buy signal all year at 1,683.  The counter Trend is currently reading a -58.

Dec. 15, 1995: countertrend was -.90.97

Aug. 5, 1997: countertrend was -.74.19

Jan. 16, 2004: countertrend was -.72.28

Feb. 14, 2007: countertrend was -.69.03

Jan. 14, 2010: countertrend was -.74.52

Feb. 2, 2011: countertrend was -.72.52

May 22 2013: countertrend was -74

Here is how the S&P 500 performed 30 days following these readings.

Dec. 15, 1995: -3.13%

Aug. 5, 1997: -2.20%

Jan. 16, 2004: +1.00%

Feb. 14, 2007: -3.15%

Jan. 14, 2010: -5.63%

Feb. 2, 2011: -2.69%