Image Source: Unsplash

The S&P 500 ended 2024 on a four-day losing streak and in the process saw its biggest decline from Christmas through year end since at least 1952.  

There was green on the screen this morning as markets began this first trading day of 2025, but those gains quickly evaporated by mid-day.As we type this, there are 30 minutes left before the 4 PM ET close, and major US indices are down roughly 0.25% on the day.

Intraday declines today pushed the S&P 500's price into oversold territory (>1 standard deviation below its 50-DMA) for the first time since mid-August.But while price just moved into oversold territory today, things are much more extreme to the downside underneath the surface.

December ended up being one of the worst months for market breadth in the last half-century; on par with months like December 2018 and October 2008.  

As shown below, the percentage of stocks in the S&P 500 that are trading above their 50-day moving averages has plummeted south of 20% even though the S&P itself isn't that far below its own 50-DMA. Interestingly, the 10-day advance/decline line for the S&P doesn't look as bad as it did a couple weeks ago, which is a positive in some respects.  

We think the key point here is that while it may not seem like the market is that extended to the downside, it most certainly is when looking at underlying breadth, and that means there's potential for a big move higher in the near term simply from upside mean reversion.

(Click on image to enlarge)

More By This Author:

Best Performing Stocks Of 2024
Stock Market Concentration
Rolling Over Into Year End