Trying to find cheap stocks? Good luck with every major index now overbought

  • Data from Bespoke Investment Group show every major U.S. stock index exchange-traded fund is currently overbought, or trading above their fair value.
  • The major indexes have traded at or near all-time highs as the U.S. makes headway with Canada and Mexico on trade, two key partners.
Shoppers walk past sale signs in a mall, White Plains, N.Y.
Scott Mlyn | CNBC
Shoppers walk past sale signs in a mall, White Plains, N.Y.

Investors looking for bargains in U.S. stocks will have a very tough time finding them, according to Bespoke Investment Group.

Bespoke's data show that every major U.S. stock index exchange-traded fund is currently overbought, or trading above their fair value. Among the variables included in Bespoke's analysis are the ETF's year-to-date gains and percentage above their 50-day moving averages, which are key technical levels.

The SPDR S&P 500 ETF Trust (SPY) and Vanguard S&P 500 ETF (VOO), both of which track the broad S&P 500 index, are each up more than 9 percent for the year and are trading about 4 percent above their 50-day moving averages.

The Invesco QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq 100 index, is up nearly 20 percent in 2018 and is trading more than 4.5 percent above its 50-day moving average.

Both the S&P 500 and Nasdaq 100 indexes hit all-time highs this week as the U.S. and Mexico struck a deal on trade, paving the way for a NAFTA replacement. Both countries also left the door open for Canada to join the new trade agreement. Canadian Foreign Minister Chrystia Freeland is currently in Washington as negotiations between the U.S. and Canada move forward.

The SPDR Dow Jones Industrial Average ETF Trust (DIA), which tracks the 30-stock Dow, is up 5.6 percent for the year through Wednesday's close and is trading nearly 4 percent above its 50-day moving average.

The Dow inched close to a record high this week amid the positive trade news coming out of Washington. The index is mainly composed of multinational companies with large revenue exposure, and thus more sensitive to trade news.

Small- and mid-cap stocks are also overbought. The iShares Russell 2000 ETF (IWM) and iShares Russell Midcap ETF (IWR), which respectively track small- and mid-cap stocks, have surged this year 13.1 percent and 7.7 percent, respectively. Both funds are also trading about 3 percent above their respective 50-day moving averages.