Banking On A Bounce

After falling more than 1% yesterday, the S&P 500 Financials sector finished its fifth straight trading day in extreme oversold territory, matching its longest stretch since the five days ending on October 5, 2023. Since 1990, there have been 37 streaks lasting at least five trading days. As shown below, some have lasted considerably longer, so reaching day five doesn’t necessarily mean the selling is over.

The latest weakness has brought Financials’ total number of oversold days this year to 43, the third most of any sector behind Utilities (62) and Consumer Discretionary (60). Those two sectors have spent considerably more time oversold than the rest of the market. Financials is closer to the middle of the pack, although its total is still well above the S&P 500’s 25 days. At the other end of the spectrum, Energy has spent just 17 days oversold.

Despite its recent trouble, Financials has actually spent more time overbought than oversold this year, with 65 overbought days compared to 43 oversold days. That puts it just behind Technology (66), although both trail Energy by a wide margin. With 104 overbought days, Energy is the only sector in triple digits and has spent more than six times as many days overbought as oversold. Utilities and Consumer Discretionary are the only two sectors that have spent more days oversold than overbought.
Financials’ current stretch of consecutive oversold days is relatively long by this year’s standards, too. Only Health Care and Consumer Discretionary have had longer streaks in extreme oversold territory, at eleven and seven trading days, respectively. Financials is tied with Real Estate and Communication Services at five days, matching the S&P 500’s longest stretch. On the upside, Consumer Staples has had the longest extreme overbought streak at 14 days, even though its 49 total overbought days rank near the bottom of the sector list.

When we broaden the comparison to include all oversold readings, Financials moves to the top of the list. Its longest oversold streak this year lasted 34 trading days, 11 more than the next closest sector, Health Care. That single stretch accounts for nearly 80% of its 43 oversold days this year. Financials has also had a 47-day overbought streak, trailing only Energy (61) and Materials (54). For Financials, periods of both strength and weakness this year have tended to stick around once they get going!