MPS, HRB, THC, TSN, BLK, GS, VLO, CI, TMO, HRL,
“As the market continues to make new highs, we wanted to look at the 10 most overbought names in the S&P 500 based on our proprietary countertrend.
As many of you know, we have been pretty constructive on the market, and in my last few columns, on Jan. 8 ,Jan. 23 and Feb. 4 , respectfully, said that the S&P 500 (SPY) was not extended based on our proprietary countertrend reading.
You may recall from our last column we showed the most overbought markets in the last 18 years based on our countertrend measure. Currently we are at a reading of -.63 on our countertrend reading, below are the six most overbought markets in the last 18 years and how they performed 30 days later.
Dec. 15, 1995, countertrend: -.90.97
Aug. 5, 1997, countertrend: -.74.19
Jan. 16, 2004, countertrend: -.72.28
Feb. 14, 2007, countertrend: -.69.03
Jan. 14, 2010, countertrend: -.74.52
Feb. 2, 2011, countertrend: -.72.52
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%
In our last column, we pointed out our thesis for the possibility of having this current market go down as one of the most overbought market in the last 18 years. You had the greatest credit deleveraging in the past 70 years with an unprecedented flood of global liquidity pushing all asset prices up. Many of the known risks of 2012 are out in the open at this juncture would need a new tail risk to reset prices….”
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