The latest bullish run on the S&P500 has been in play since around March 2020 and so I’m looking for any clues that it might be starting to get a bit tired. One charting indicator is suggesting that US stocks are reaching into an overbought region and this is worth noting given this lengthy bullish stock run.

S&P500 yearly: the Log chart below shows that the S&P500 has essentially been in one general uptrend since its inception. There have been a few periods of sideways price action but two of these periods were followed by a 20-year bullish run. The most recent period of sideways consolidation broke around 2013 suggesting, if history were to repeat itself again, that there could be another thirteen years to go with this run! My point in showing this chart is to help traders keep an open mind about any continued bullish run on the index.

S&P500 weekly: the weekly chart below shows this latest bullish run since March 2020 and how price action is currently negotiating the 3,700 whole number level. Placing an Elliott Wave Extension tool on the Covid-induced pullback of Feb-March 2020 shows that the 61.8% Fibonacci extension is up near 4,150. Thus, if price action does keep marching higher then this would be the next major level to monitor for any new wobble.

However, there is one other chart worth inspecting and that is the chart showing the percentage of stocks above their 200 daily Moving Average. This scale on this chart osculates between 0 and 100. As with many oscillators, price action near the upper end of the spectrum points to stocks being overbought and to being oversold when near the bottom of the spectrum. The weekly and daily charts of this particular chart are outlined below.

Stocks% above the 200 daily Moving Average (weekly chart): The percentage of stocks above their 200 Day Moving Average has edged up above the 85% region. The chart below gives a perspective of this current level and shows how there often tends to be some mean-reversion once such lofty levels are reached. The highest level reached on this scale is around the 92.50% region so there is still a bit of room to run here. However, it might be prudent to watch out for any pause or pullback with US stocks given this chart profile AND their recent and lengthy bullish run:

Stocks% above the 200 daily Moving Average (daily chart): the daily chart below shows that this uptrend has been in play since early March 2020. The most recent daily candle was an indecision-style Spinning Top that printed just under the the 92.50 maximum region. Note, also, the recent gap higher; a Gap fill move could well evolve here:

Given that the percentage of stocks above the daily 200 Moving Average is moving into an overbought region it would be wise to watch and see if this latest lengthy bullish run on the S&P500, and other US major indices, might be starting to tire and due a pause.

S&P500 weekly + Fibonacci retracement: The weekly candle of the S&P500 is currently shaping up with a bearish-coloured Spinning Top reflecting indecision although there are two days left of trade before this candle closes. There is a support trend line in place under this uptrend so that would be one level to monitor if price action does start to retreat. It is worth noting that the 61.8% Fibonacci of this latest swing High move, from March to December, is down near 2,800 and that would be one level to target if price action does experience a significant pullback. Technical Theory would suggest though that this overall uptrend remains intact unless the 2,800 is decisively broken; so there is quite a bit of wriggle-room here.

Concluding comments:

The longer-term trend for the S&P500 index remains up and this latest bullish run has been in play since March 2020. Analysis of the chart of percentage of stocks over their 200 Day Moving Average suggests stocks are in an overbought region and so it might be worth watching for any pause, or pullback, especially considering the length of this latest bullish run. Trends do not run in straight lines unabated, they tend to zig and zag, and a pullback on the S&P500 to the 2,800 level would not be out of order as part of its overall uptrend.