Bearish Momentum and Sentiment Signals – Part Two

My original intention was for this blog to give a comprehensive view of evidence from all four market dimensions: price, time, momentum, and sentiment.  There’s just too much data, so this post will focus on additional long- and short-term momentum/sentiment evidence.

The weekly S&P 500 (SPX) chart courtesy of Trading View  illustrates long-term momentum/sentiment signals.

Market Vane Corporation developed the Bullish Consensus as a contrary indicator.

The Bullish Consensus is market sentiment which is derived by tracking the buy and sell recommendations of leading commodity futures market advisers. High percentage number usually correspond with market tops, low percentage readings are usually at or near bottoms. For the US stock markets reading from the low to mid sixties indicate potential major tops. The strongest Market Vane signals for stock market peaks usually come on divergences.

The highest Market Vane reading for the secular bull market 2009 to 2021 came in January 2018 and  corresponds  with the highest reading from weekly SPX – RSI.

The readings in January and February 2020 illustrates what could happen after a double and triple bearish divergence.  As of the week beginning June 14, 2021, there’s a double bearish divergence vs. the SPX peaks made in January 2018 and October 2018.

Weekly MACD has a bearish lines crossover and the latest reading from the Histogram is -10.61 and lower than the reading of -6.38 from October 2020.

Weekly RSI has a double bearish divergence, and the latest reading has gone below the level recorded  the week beginning May 17th . This implies price could soon be below the mid – May  bottoms.

The daily SPX chart zooms in on the action since October 2020.

 The most striking feature on this chart is the pathetic rally from 05/19/21 to 06/15/21. Its so weak the momentum indicators are almost redundant.

Daily MACD has a significant bearish divergence and lines have a bearish crossover off the divergence.

Daily RSI has a double bearish divergence, and the latest reading confirms the message from the weekly RSI – a move below the mid – May bottoms.

The daily SPX – Bullish Percentage ($BPSPX) Index chart courtesy of StockCharts.com illustrates the SPX internal momentum.

The Bullish Percent Index  is a breadth indicator that shows the percentage of stocks on Point & Figure Buy Signals. This is a great tool to discover hidden market strength or weakness.

Maximum internal momentum occurred in June 2020. The recent reading at the SPX 06/15/21 all-time high was a double bearish divergence.  The SPX decline last week has moved $BPSPX significantly below the mid-May correction bottoms!

The bearish evidence from just two market dimensions is table pounding and there’s even  more evidence from the price and time dimensions!

Trader short 100% non-leveraged SPX related funds on the open of the SPX 06/21/21 trading session.  Use a move above SPX 4290.00 as a stop loss for 50% of the position.  Use  a move above SPX 4310.00 as a stop loss on the remaining 50%. 

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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