Market Fuel Gauge

Market  momentum oscillators  such as  Stochastic and RSI can be used to measure the length of a  price  movement, think of them as  fuel gauges.  A  review  of some S&P 500 (SPX) momentum oscillators  illustrate  the potential remaining  fuel.    

The monthly SPX chart courtesy of Trading View illustrates  long-term momentum.

This chart was  first  shown in the 07/07/22 blog “Long-Term Momentum Implies  Multi – Week Rally” and  noted that monthly Stochastic had reached the oversold zone. Also noted was the SPX March to May 2008 rally in which the monthly Stochastic rebounded from the oversold zone.  The monthly Stochastic lines  readings at the May 2008 peak were 44 and 35. The monthly Stochastic readings as of 07/29/22 were 41 and 28  implies more  upside action.

The weekly SPX chart shows Stochastic and MACD  indicators.

The current weekly Stochastic lines readings  are 73 and 45.  The weekly Stochastic readings at the May 2008 peak were 99 and 91.  Its possible the current weekly Stochastic could also travel into the overbought zone along with higher SPX prices.

The current weekly MACD just had a  bullish lines crossover.  In April 2008 weekly Stochastic had a bullish lines cross over, SPX peaked six – weeks later.  If the current bullish crossover matches the results of 2008 it implies the SPX could top in early September 2022.

The daily SPX chart illustrates Stochastic, MACD, and RSI.

Daily RSI has still not reached the overbought zone – above 70%. Frequently stock market peaks do not occur until RSI is overbought and  has at least one bearish divergence.     

The time target of 8/04/22 for a potential top was illustrated in the blog “Bullish Breakout – 07/20/22” is based on the daily Stochastic remaining  overbought 11 – trading days after 07/20/22.  The 08/22/22 time  target was featured in the 07/07/22 blog is based on the post 06/17/22 SPX rally matching  the SPX March to May 2008 rally.   

The down trendline connecting the SPX January and  March 2022 tops could act as  resistance. Note that in mid to late  August the line is  near the SPX double peak around 4300.

The combined evidence from Stochastic, RSI and MACD  implies  the SPX could continue to rally.  The most likely  rally termination date is  08/22/22.  Most likely price resistance is  in the low 4300 area.