Momentum and Sentiment Indicator Review – 05/13/22

The 05/12/22 blog “ Nasdaq is  Extremely Oversold”  illustrated the weekly Nasdaq Composite – Slow Stochastic.

The weekly Nasdaq Composite chart (COMP) courtesy of BigCharts.com updates the action.

Weekly Slow Stochastic now has a bullish lines crossover in the oversold zone.  Additionally, COMP went deeply below the lower Bollinger band and has  moved back above the band.  These two signals  imply  COMP could have at  least a two-week rally.

When momentum indicators  make lows that correspond with new price lows it implies  the down trend at some point could continue.

The daily  Nasdaq 100 – Bullish Percent Index ($BPNDX) courtesy of StockCharts.com updates the action of this momentum indicator . 

The bullish $BPNDX divergences  illustrated in prior web site blogs have been eliminated.  $BPNDX momentum confirms  the Nasdaq price low made on 05/12/22.  The S&P 500 – Bullish Percent Index $BPSPX confirms  the S&P 500 (SPX) low made on 05/12/22.

The daily Nasdaq new – 52 – week lows chart $NALOW updates the status of Nasdaq new lows.

On 05/09/22 $NALOW had a  marginal bullish  divergence  vs. the Nasdaq Composite 01/14/22 bottom. On 05/12/22 there was a short-term bullish divergence vs. the  05/09/22 Nasdaq Composite bottom. 

On 05/12/22 NYSE new – 52 – week lows $NYLOW had eliminated all prior bullish divergences.

The daily VIX/SPX chart courtesy of Trading View updates this sentiment indicator.

Frequently large VIX  up spikes  correspond to important lows for the  (SPX).  Occasionally the SPX  makes a  lower bottoms that correspond with lower VIX tops – a bullish sentiment divergence.  A  classic example of this phenomenon occurred in March 2020.  On 03/18/20 the VIX reached its maximum high point.  On 03/23/22 the VIX made a  lower top while the SPX was making  its ultimate  bottom.

Normally there’s  only one VIX divergent top.  So far in 2022 there have been three  bullish divergences, this is uncharacteristic and suspicious.   There’s  a  good chance for a multi-week SPX rally, but the triple VIX bullish divergence may not be a super bullish divergence implying  a  new SPX all-time  high.

When momentum  indicators  for markets  invalidate  bearish/bullish divergences  it’s  a  hint of the main trend. The weight of evidence from the Bullish Percent Indices, and new – 52 – week lows  confirm the bottoms  made on 05/12/22.  For US stocks the main  trend could be down.   It’s possible  the SPX and or the Dow Jones Industrial Average could retrace close 90% of their respective 2022 declines.  If the move up that began on 05/12/22 can  continue until 05/20/22, this scenario will be examined in a future blog. 

Since the SPX 03/29/22  top the rallies  have  not lasted longer than three- trading days. If the SPX is  making  new post 05/12/22 rally highs after 05/17/22 it increases  the chances for a multi-week rally.  

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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