S&P 500 Hits a Divergence Not Seen Since 1990, Bespoke Says

The S&P 500 closed at 7,688.62 on Wednesday, sitting slightly below its 50-day moving average — even as almost 47% of its member stocks screened as overbought on Nov. 2, according to Bespoke Investment Group.

That combination has produced some of the strangest chart setups Paul Hickey has witnessed in his career. Hickey, co-founder of Bespoke Investment Group, said in commentary shared with MarketWatch that the push and pull between the index and its own constituents has resulted in some of the most unbelievable charts he has ever seen.

The divergence is stark. The S&P 500's recent drop below its 50-day moving average pushed it into "extreme oversold" territory this month, Bespoke data shows. Extreme readings for the index occur only a handful of times a year. But extreme oversold conditions arriving while nearly half the index's components trade at overbought levels is unprecedented going back to at least 1990, according to the firm.

How rare is this setup?

Bespoke tallied only five other days since 1990 when the S&P 500 finished more than two standard deviations below its 50-day moving average while more than a quarter of its stocks screened as overbought:

• Two trading sessions in December 2000
• One session in August 2024
• Two sessions in March 2025

Past divergences existed, but Bespoke notes they were extremely infrequent and much less extreme than the current episode. In plain words: the market has never split this sharply between its giants and everything else, at least in 35 years of data.

What's driving the divide?

"It is a function of the concentration in the market," Hickey told MarketWatch by phone Wednesday.

A handful of tech and tech-adjacent stocks have amassed unparalleled influence over the index's direction, he explained. That concentration creates a paradox: the S&P 500 often trades lower even as most of its members move higher. On days when the index's "big generals" struggle, the index usually follows — even while investors shift capital into other corners of the market.

Wednesday's session illustrated the dynamic in reverse. Big Tech propelled the S&P 500's rally as investors weighed U.S. midterm election results that handed Democrats control of Congress. The index closed at 7,688.62, per FactSet data, still ending slightly below its 50-day moving average — a reminder that even a Tech-led rebound hasn't fully pulled the benchmark out of its oversold stretch.

The takeaway: when seven-figure index weightings sit with a few names, the S&P 500 stops telling you what the average stock is doing. Investors reading the index as a market-wide signal are, by Bespoke's account, looking at a sample that half its own members no longer resemble.