S&P 500 Index Closes At Record Heights, Reaches Most Overbought Conditions Since January 2020

The S&P 500 index concluded Thursday’s session at 5,171, marking a 1% increase and reaching fresh historical highs.

This rally shifted the week’s momentum to positive, potentially marking the 17th gain in the last 19 weeks, unless the index falls by 0.4% on Friday.

Since the end of October, the index, as monitored through the SPDR S&P 500 ETF Trust SPY, has surged over 25%, a testament to the strong trend driving the U.S. equity market.

Currently, the breadth of the market remains healthy with 71% of the S&P 500 stocks trading above their 50-day average, and an even more impressive 74% surpassing the 200-day average. The latter is inching closer to the 75% threshold, a peak not reached since January and the highest since October 2021.

Chart: S&P 500 Breaks All-Time Highs Again

Diverse Sector Performance Defines This Week’s Rally

In a significant departure from previous weeks when the technology sector was predominantly at the forefront of the S&P 500’s advances, this week witnessed a nuanced shift in market leadership.

Sectors that had previously lingered in the background, overshadowed by the tech behemoths, emerged as this week’s frontrunners.

The materials sector led the charge with a 2.8% increase, closely followed by utilities, energy, and consumer staples, showcasing gains of 2.4%, 2%, and 1.73%, respectively. The tech sector, usually the market darling, found itself in the fifth spot, rising by 1.69%.

Sector	This week’s performance
Materials Select Sector SPDR Fund XLB	2.63%
Utilities Select Sector SPDR Fund XLU	2.38%
Energy Select Sector SPDR Fund XLE	1.96%
Consumer Staples Select Sector SPDR Fund XLP	1.73%
Technology Select Sector SPDR Fund XLK	1.69%
Real Estate Select Sector SPDR Fund XLRE	1.51%
Industrials Select Sector SPDR Fund XLI	1.29%
Health Care Select Sector SPDR Fund XLV	1.28%
Financial Select Sector SPDR Fund XLF	0.47%
Communication Services Select Sector SPDR Fund XLC	0.43%
Consumer Discretionary Select Sector SPDR Fund XLY	-1.87%

Extreme Technical Overbought Signals Emerge

Despite the euphoria surrounding the S&P 500’s record-breaking run, a closer examination of the technical landscape reveals emerging caution signs.

The index’s relentless upward trajectory has catapulted the Relative Strength Index (RSI) to a staggering 77, a figure not seen since January 2020, just before the global markets were roiled by the Covid-19 pandemic.

Such elevated RSI levels are traditionally viewed as overbought signals, suggesting that the current pace of the rally might be stretching the bounds of sustainability.

Chart: S&P 500’s Weekly RSI Reaches Most Overbought Levels In Four Year