S&P 500 Points to `Significant Rally

S&P 500's Drop Points to `Significant Rally': Chart of the Day

By David Wilson

Oct. 7 (Bloomberg) -- U.S. stocks may be destined for a rebound because so many shares in the Standard & Poor's 500 Index have fallen to relatively low prices, according to Bespoke Investment Group LLC.

``We believe a significant rally is set to take place,'' Bespoke's analysts wrote in a report today. Only 28 companies in the S&P 500 closed yesterday above their average price in the last 50 trading days, a signal that shares were ``oversold,'' the note said.

The CHART OF THE DAY shows the S&P 500 and its 50-day moving average this year. Yesterday's close was 14.7 percent lower than the average, the biggest discount of the year.

Four of the index's 10 main industry groups -- energy, industrials, materials and telecommunications -- didn't have a single stock close above its 50-day average yesterday, Bespoke's data show.

Only one health-care company, Pfizer Inc., and one technology company, SanDisk Corp., exceeded the average. Family Dollar Stores Inc. was the sole representative in the consumer- discretionary category, including homebuilders, media companies and restaurants as well as retailers.

Three utilities and seven makers of consumer staples, such as food, household products and tobacco, surpassed their 50-day moving averages. The other 15 were all financial stocks, led by Huntington Bancshares Inc., which ended the day at a premium of 24 percent.