BTIG Says US Sector Rotation Is Masking Market Fragility, Raising Risk of Broad Selloff
Summary
- BTIG said persistent sector rotation in the US stock market is masking underlying fragility and could lead to a broad selloff.
- It said 22% of S&P 500 stocks are in technically overbought territory, but the index's RSI remains at 50.4, a divergence seen only once before on April 19, 1999.
- By sector, semiconductor stocks have entered oversold territory, while defensive shares are becoming increasingly overbought.
Forecast Trend Report by Period
Persistent sector rotation in the US stock market is masking growing fragility beneath the surface, raising the risk of a broad selloff, according to BTIG.
Walter Bloomberg reported on November 5 that the financial services firm said investors have been selling some stocks to buy others, but that rotation is not translating into a broader market advance.
Currently, 22% of S&P 500 constituents are in technically overbought territory, while the index's relative strength index, or RSI, stands at 50.4.
BTIG said there has been only one previous instance when the gap between the share of overbought individual stocks and the index's RSI was wider: April 19, 1999.
By sector, semiconductor stocks have entered oversold territory, while defensive shares are becoming increasingly overbought.
JH Kim
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