Talking Numbers

The one reason you need to buy stocks right now

The one reason you need to buy stocks right now

Now watching

Next video starts in : 7 Play

The one reason you need to buy stocks right now

The one reason you need to buy stocks right now
Replay video
Up next

Why the market has more room to go

Why the market has more room to go Up next

Why the market has more room to go

Stocks have been taking a beating over the past month—but one technical indicator suggests they could now be a buy.

“It’s very similar to these oversold pullbacks we’ve had over the past few years,” said Ari Wald, head of technical analysis at Oppenheimer & Co. “Oversold conditions are a reason to buy the market.”

The S&P is down less than 3 percent from recent highs. But Wald says the market is already a buy on weakness.

(Read: A controversial theory is starting to scare the Fed)

View photo

.
He looks to one indicator: The percentage of stocks above their 50-day moving average. In June, around 90 percent of stocks were above their 50-day moving average. Now, just 23 percent are, which is the lowest that reading has been since November 2012.

“As a sign of internal exhaustion, we view this as a buy signal,” Wald wrote in a recent note.

Gina Sanchez, founder of Chantico Global, doesn’t believe that stocks are trading at a discount despite indicators saying they are oversold.

“We’re still not screamingly cheap yet,” said Sanchez, a CNBC contributor. “We’re right at about fair value now.”

She expects that the S&P will keep falling, which “should take out what are the remaining market participants that are holding on.”

(Watch: Here’s what keeps Blackstone's Byron Wien up at night)

But her outlook for year-end is more constructive.

“Once we see that capitulation, I do actually think that we could see a recovery coming into the fall,” she said.

To see the full discussion on the S&P 500, with Wald on the technicals and Sanchez on the fundamentals, watch the above video.

View Comments (129)