Investors have been waiting for a broadening out of the rally for even longer than they’ve been pricing in (and then pricing out) rate cuts, but while breadth may still be relatively narrow, there has been a good deal of rotation recently.

Let’s start with where the market stood heading into today. We measure overbought and oversold levels as a closing price that is one or more standard deviations above (below) the 50-day moving average (DMA). By that measure, the S&P 500 closed at overbought levels for 40 straight days through the close on 3/14. While that sounds extreme, we would note that in the period ending on August 1st of last year, the S&P 500 closed at overbought levels for 45 straight days in what was the ‘summer of overbought’.

Now let’s get to the part about rotation. While the S&P 500 has been overbought for the last 40 trading days, not a single sector has closed at overbought levels for as many days. As shown in the chart below, the streak for the Financials sector has been close at 39, followed by Industrials at 30 days. After those two sectors, no other sector has closed at overbought levels for even half as long as the S&P 500. To put that in perspective, since daily sector price data starts in late 1989, there have been eleven other periods where the S&P 500 closed at overbought levels for at least 40 trading days, and of those periods, there was only one (in 2012) in which not a single sector had seen 40 or more overbought straight closes on the same day that the S&P 500 reached 40.

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