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S&P 500 Stays Overbought for 1 Year: 3 Must-Watch Stocks That Could Surge!

Hannah Perry | October 4, 2024

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Why S&P 500’s Year-Long Overbought Signal Has This Expert Talking, Plus 3 Stocks To Watch

Greetings, trend followers! Buckle up as we dive into a potent discussion ignited by retail industry veteran Seth Golden. Recently, Golden raised eyebrows when he pointed out that the S&P 500 has remained persistently overbought for an entire year, as indicated by the widely used momentum oscillator, Williams %R. You heard that right!

Now, let’s break down exactly what this means. Golden, a respected hedge fund consultant with a pedigree from places like Target and the now-defunct Bed Bath & Beyond, claimed this is only the 23rd occurrence of such a phenomenon in history. Historically, when the S&P 500 has been continuously overbought, it has maintained its upward trajectory, boasting a fourth-quarter median gain of **5.29%**. If you’re looking for actionable intel, consider this your wake-up call.

The Williams %R Indicator Explained

For those who might not be familiar, Williams %R is a momentum indicator that measures the overbought and oversold levels of a stock on a scale from 0 to 100. A reading above -20 signifies that a stock is overbought, while a reading below -80 indicates oversold status. Golden utilized a **28-month parameter**, which is a prevailing standard for this indicator. With the S&P 500’s current standing, it is primed for potential opportunities, and we’re here to identify them!

Top Stocks to Watch While the Trend Holds

With the S&P 500’s current overbought signal in mind, let’s explore three stocks that stand out on this radar:

1. Lockheed Martin (LMT)

Lockheed Martin has made waves on the market, hitting a fresh all-time high of **$609**—a remarkable feat that pushes the company’s market cap past **$144 billion**. This aerospace and defense titan thrives amid escalating global tensions, particularly bolstered by a new multi-billion dollar contract with the U.S. Navy that it secured last Thursday. Despite carrying a substantial debt of **$19.26 billion**, the company is well-positioned to handle it, alongside delivering a steady **2.1%** dividend. Its Williams %R overbought score currently stands at **-11.41**. Time to watch this one closely!

2. Lowe’s Companies Inc (LOW)

Next, we have Lowe’s, the North Carolina-based home improvement retailer that has also reached astonishing heights, peaking at **$274.16**. After the Federal Reserve’s recent rate cuts, Lowe’s stock experienced a surge akin to others in the home improvement sector. However, proceed with caution—Lowe’s reported a year-over-year revenue decline of nearly **10%**, and analysts have downgraded their future growth projections. Despite this lull, its current Williams %R overbought score is at **-5.71**. Keep your eye on the charts, but be wary of potential retracements.

3. Entergy Corp (ETR)

Last but not least, we have in our sights Entergy Corporation, a standout in the utility sector that has delivered an impressive **30% return** so far this year. What makes this even more enticing is its modest price-to-earnings (P/E) ratio of **15.9x**, which is more favorable compared to some competitors like Exelon or FirstEnergy. Entergy, which provides electric power to multiple southern states, is primed for growth amidst booming energy demands driven by population surges and industrial expansion, particularly in Texas. Its Williams %R overbought score is positioned at **-7.41**. Another contender to evaluate closely!

Conclusion: Stay Ahead of the Curve

As we wrap up this trend analysis, remember that while the S&P 500 shows signs of continued strength, vigilance is paramount. The sentiment from historical trends suggests that despite overbought indicators, we may still witness considerable upside momentum. Assess Lockheed Martin, Lowe’s, and Entergy carefully as the market dynamics evolve.

Keep your trading strategies sharp and your charts updated. Be ready to pivot when opportunities arise, and always stay tuned to emerging signals in this ever-shifting market landscape. Until next time, may the trends be ever in your favor!