A Review of Momentum Indicators – 09/16/22

Market momentum should at least match or exceed price  movements.  Momentum divergences  imply lack of conviction and could be the prelude to a reversal. This  blog updates momentum indicators that were illustrated in the 09/14/22 blog “Erratic Price Movements”.

The daily S&P 500  (SPX) chart courtesy of Trading View examines  external momentum.

As of 09/14/22 the SPX – RSI had an hourly bullish divergence.  With the subsequent SPX break below the 09/06/22 bottom there’s now a daily bullish divergence.  However daily RSI has yet to reach the oversold zone below the RSI 30% line.  Its possible a near-term rally could be just a pause before a decline that brings the daily RSI into the oversold zone.

Daily MACD has a bullish Histogram divergence.  However, the lines have no divergence.

Daily Stochastic has a marginal bullish lines crossover.

The daily chart courtesy of StockCharts.com examines  an internal momentum indicator.

The US New Highs minus New Lows (5-day total – end of day) StockCharts.com symbol ($USHL5) has a bullish divergence vs. the level recorded at the 09/06/22 SPX bottom. Relative to price  this divergence illustrates a shocking lack of bearish conviction.

The cumulative daily SPX – Advance/Decline line chart – StockCharts.com symbol ($SPXADP) also shows a bullish divergence vs. the 09/06/22 price bottom.

The weight of evidence from the four market dimensions.

Time: Seasonally bearish from mid-August to late October – strongly bearish.

Price: SPX beak below 09/06/22 bottom and .618 Fibonacci support opens the door for a move down to the 06/17/22 bottom – moderately bearish.

Sentiment: Excessive bearish sentiment from two indicators noted in the prior blog – strongly bullish.

Momentum: Bullish divergences from several indicators – strongly bullish.

Overall, the evidence gives the bulls a small advantage.  The very important FOMC interest rate announcement on 09/21/22 could be the deciding factor.

Market forecasting  is similar to weather forecasting, and  neither is  100% accurate. With  weather forecasts evidence can indicate a storm is  forming , then it dissipates.  If the bullish evidence holds, stock market bears could soon be in a  storm.         

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.

2 thoughts on “A Review of Momentum Indicators – 09/16/22

  1. Thanks for the compliment. Yes the bearish sentiment is very strong. If a move up has begun, or will begin in a few days it could become a classic example of too much money being bet on the wrong dirrection.

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