Late to the bull party? Nearly half of S&P 500 stocks continue to show no significant trend breakthroughs to date.
What Happened: SPDR S&P 500 ETF Trust SPY gaining over 10% since Oct. 27. This marks the index’s strongest 17-day rally since November 2020, a surge initially fueled by the Covid-19 vaccine breakthrough.
The year-to-date return for the broader market now stands at 18%, nearly doubling the 30-year average annual return of 9.862%. However, this bullish sentiment isn’t uniformly reflected across the board.
Surprisingly, only about 52% of S&P 500 components are currently trading above their 200-day moving average, often viewed as a key technical determinant of a stock’s long-term trend.
Rewind to November 2020, a comparable rally saw 90% of S&P 500 stocks trading above their 200-day moving average.
Chart: S&P 500 Had Its Best 17-Day Rally Since November 2020
Top 10 S&P 500 Stocks With The Widest Discounts
Only about 52% of S&P 500 components are currently trading above their 200-day moving average, despite the robust rally of the past weeks.
Some stocks — EPAM Systems Inc. EPAM, Citigroup Inc. C, Quest Diagnostic Incorporated DGX, and Agilent Technologies Inc. A — are hovering near these levels. Others are lagging considerably behind.
The table below reveals the 10 S&P 500 stocks exhibiting the largest price discrepancies when compared to their 200-day average levels.
| Name | Last Price | % Distance vs. (200-Day Avg.) |
|---|---|---|
| SolarEdge Technologies, Inc. SEDG | 78.87 | -64.91% |
| Illumina, Inc. ILMN | 95.72 | -46.74% |
| FMC Corporation FMC | 53.11 | -44.98% |
| Enphase Energy, Inc. ENPH | 98.16 | -37.97% |
| Paycom Software, Inc. PAYC | 178.38 | -37.31% |
| The Estée Lauder Companies Inc. EL | 120.10 | -36.44% |
| Albemarle Corporation ALB | 125.97 | -36.37% |
| Moderna, Inc. MRNA | 77.42 | -35.96% |
| Align Technology, Inc. ALGN | 215.07 | -30.99% |
| Walgreens Boots Alliance, Inc. WBA | 20.87 | -28.27% |
Risk of Value Traps?
A stock significantly below its 200-day moving average may indicate either a potential bargain or a fundamental issue with the company.
A value trap occurs when a stock appears to be cheap but is actually fairly priced due to declining business prospects.
Therefore, it’s crucial to differentiate between a stock that’s undervalued due to market overreactions and one that’s declining due to underlying business problems.
In conclusion, despite being a a powerful tool for understanding long-term market trends, the 200-day moving average also has its own limitations. It’s a lagging indicator, meaning it reflects past price movements and may not accurately predict future trends.
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