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Stocks seeing rare stretch of 'overbought' conditions, and Bespoke's Paul Hickey calls it 'impressive'

It appears stocks are heading deeper into overbought territory with this week's new highs.

According to Bespoke Investment Group co-founder Paul Hickey, prices in the S&P 500 haven't justified fundamentals for more than 40 trading days in a row. That's the longest streak for the index in nearly six years.

There's a specific process Hickey goes through to get these levels.

"One of the things we measure on a regular basis is how far ... the S&P 500 is trading above or below its 50-day moving average. We measure it in what's called standard deviations. Anytime it gets one standard deviation above or below, it's either overbought or oversold," Hickey said Tuesday on CNBC's "Futures Now."

Just because Hickey is detecting overbought conditions doesn't mean investors should consider unloading stocks, he said. In a special note to CNBC, he called it "pretty impressive."

The trend may actually be a bullish signal for the rally. Hickey points out the S&P 500 posted above-average gains in the next one to three months after streaks like this one ended.

Yet, he acknowledges that it's uncommon to see such consistency in this instance of such overbought readings. Hickey said the last one was in 2012.

"The initial, gut reaction that people think is ... when you're overbought for a long time, the market's going to revert to the mean, and conversely that's going to be followed by oversold readings," he said. "But the opposite, in reality, is the case."

It's been a banner year for stocks — with the S&P 500 rallying nearly 16 percent since the beginning of 2017. Since the first trading day of October, the index is up nearly 3 percent.

"The fact that we're overbought by itself doesn't mean that we're due for an enormous pullback," Hickey said.

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