Bearish External Momentum Indicators

The weekly S&P 500 (SPX) chart courtesy of Trading View illustrates two external momentum indicators.

The highest weekly RSI reading for the entire secular bull market 2009 to 2021 occurred at the January 2018 peak.  Subsequently there was a double bearish divergence at the February 2020 top. followed by  a one-month crash.  The maximum RSI reading since the  March 2020 bottom occurred in May 2021. The current RSI reading in July is diverging from the May top.

Weekly MACD lines has a bearish divergence.  The MACD – Histogram has several bearish divergences.  Also note as the SPX made another new high, the Histogram is still below the zero line – a very bearish signal.

Also illustrated on the chart are Market Vane – Bullish Consensus numbers.    

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

The Bullish Consensus is a market sentiment indicator 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 Bullish Consensus reading for the entire secular bull market 2009 to 2021 occurred in January 2018, the same time as the maximum weekly RSI number. 

The most recent weekly reading was 66%, in the zone for a major top and with a divergence.

External and internal momentum indicators are bearish. 

Long-term sentiment is bearish. 

The next blog will illustrate some fascinating relationships within the price dimension.

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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