Markets were very jittery last week, with S&P 500 falls largely attributed to investors being spooked by hawkish signals from the Federal Reserve.
That’s fair enough, but it’s an incomplete explanation — after soaring 18 per cent in two months, a pullback was arguably overdue. Bespoke Investment notes that prior to the market retreat, more than 70 per cent of stocks were technically overbought — “easily the most extended reading over the last year”.
Bespoke’s data also indicated further near-term weakness was possible. Even after the recent retreat, the S&P500 was still “just barely below” overbought territory. Almost a third of individual stocks remained technically overbought; just 8.6 per cent were oversold.
That meant indices could suffer further declines in the event of any unpleasant surprises, with Bespoke cautioning that truly oversold levels “are much, much lower from here”.
Your work questions answered: My hours have been cut but someone new has been hired. Can my employer do this?
Cliff Taylor: How the return of SSIA-style incentives might be on the cards for Irish households
From intern to CEO: does it pay to be a company lifer?
My remuneration ‘was substantial’: The interview transcript Derek Quinlan didn’t want made public
As it happened, much lower prices weren’t far away. Investors were clearly wrongfooted by Federal Reserve chief Jerome Powell’s hawkish speech at Jackson Hole on Friday. The market mood has shifted again, from greed to fear.