This trend helps explain why the market is falling

Is the rally finished? Traders debate
Is the rally finished? Traders debate   

The stock market rally off the early-February lows has created an unusual condition that could be a concern over the next month or so.

More than three-quarters of the S&P 500 components have moved into "overbought" territory, meaning that they are more than one standard deviation away from their 50-day moving average, according to Bespoke Investment Group.

The move comes as the index had gained as much as 14 percent from the Feb. 11 intraday low and could help explain why the market has pulled back some in recent days, falling nearly 1 percent in the holiday-shortened week. Sharp declines in energy, financials and materials have led the move lower.

Read MoreThe nagging problem with the stock market's rebound

Along with the gains, professional investors have become strongly optimistic, another contrarian factor that could be contributing to the recent downturn.

The level of bulls in the latest Investors Intelligence survey, which polls market newsletter editors, registered 44.4 percent, which was a gain of 20 percentage points from the level a month ago and near the November 2015 peak that coincided with a market top just before a sharp 14.4 percent correction. The survey also found bears at 30.3 percent.

The S&P 500 has reached these overbought levels just five other times since 2007, most recently in January 2013, according to Bespoke.

Historical trends since 2009 suggest that the market falls on average in the one week and one month out periods.

But there's good news: Past trends also show that the market corrects itself quickly, and the overbought conditions haven't caused long-term damage. The table below shows how markets have fared recently under similar circumstances:

Date
% Overbought
S&P 1 week
1 month
3 months
6 months
5/6/2009 75 -3.9 2.2 8.4 16.3
4/5/2010 75.8 0.8 -1.8 -13.9 -2.2
10/13/2010 76.6 0 1.8 9 11.6
10/27/2011 80.2 -1.8 -9.8 2.5 9.2
1/22/2013 77.4 1 1.5 4.7 13.6
Average -0.8 -1.2 2.1 9.7
Median 0 1.5 4.7 11.6
Bespoke Investment Group