US Stock Market Momentum and Sentiment – Part Two – 05-02-22

Today 05/02/22 the S&P 500 (SPX) went below its 02/24/22 bottom eliminating the bullish divergence  of only the Nasdaq Composite (IXIC) making new  decline lows.  While eliminating the bullish divergence  there are others made by the new SPX low.

The combined daily SPX and VIX chart courtesy of Trading View illustrates  the  bullish divergences.

The first bullish divergence was made by the SPX daily RSI, note it is above the level recorded at the SPX 04/26/22 bottom, and above the level recorded at  the SPX 02/24/22 bottom. The SPX 05/02/22 low at 4062.51 almost reached the 05/19/21 bottom at 4061.41.

There where two bullish signals  made by the VIX.  The VIX 05/02/22 high was more than 20% above its 10 – day moving average (MA), which usually implies  the VIX  could be at or near a climax.   Also note that so far the VIX is still below the levels  recorded at the SPX bottoms made on 01/24/22 and 02/24/22 bottoms. This  implies  on  a monthly basis the panic is subsiding.  Of course, the VIX could go  higher.  The  VIX 05/02/22 high was 36.64, VIX reached 85.47 in March 2020.

Internal momentum indicators continue to show the bears are losing  power.  So far the IXIC has been the weakest of the three  main US stock indices.  IXIC is down 24.6% from its  all-time  while the SPX is  down only 15.7%.

The daily Nasdaq New – 52 – Week Lows ($NALOW) chart courtesy of StockCharts.com updates the action of this internal momentum indicator. 

New Nasdaq 52 – Week lows are still below the level reached at the IXIC 04/27/22 bottom.

The Nasdaq 100 – Bullish Percent Index ($BPNDX) chart confirms  the bullish evidence of the new Nasdaq lows.

The $BPNDX is above the level recorded on 04/27/22 which was well above the level reached at the IXIC – 02/24/22 bottom. 

Today traders were stopped out of half of a 50% position of non – leveraged SPX related  funds initiated at the SPX open on 04/29/22.  The stop level was SPX 4114.65.  The total price move from the 04/29/22 entry was 3.2%.  The loss on half of a 50% position was .80%.

Near-term bearish sentiment readings  could be at an extreme. Intermediate – term bearish sentiment is  decreasing, while less  stocks are making new lows. These are the signals seen at or near significant bottoms. 

US stocks could be on the verge of a multi -week rally that could push back to at least the all-time  high. 

There could be another opportunity to enter long  positions very soon. I will have a  blog  after the SPX session closes on 05/03/22.

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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