The top chart shows my proprietary measure of short-term stock market momentum. As a rule, momentum tops ahead of price. While momentum has stayed positive (above 1.0), we're seeing some waning of momentum as SPY (blue line) has marched to new price highs this past week. Given the recent market strength, with new 20-day highs significantly outpacing new lows, I'd look for pullbacks in momentum to under 1.0 as potential buying opportunities.
An even clearer illustration of recent waning momentum can be seen in the proprietary measure of Demand and Supply (bottom chart), which tracks the number of stocks closing above and below the volatility envelopes surrounding their moving averages. Demand tends to top ahead of price; note how we're not only seeing low Demand recently, but Supply actually outpacing Demand as we've moved higher.
Once again, I'd lean toward buying pullbacks in which Supply greatly exceeds Demand. As long as peaks in Supply are occurring at successively higher price lows, I would remain a bull on this market per the recent indicator review. An updated indicator review will follow shortly.
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3 comments:
Thanks for the updated indicators. This is the point in time where adverse news could really flush out some late buyers, and perhaps, create the conditions you point out for a swing long entry. We do have important manufacturing data out in the morning...
That supply and demand illustration with the SPY is excellent. Thanks for that hope to see more posts on this in future.
Kind regards,
Jonathan
Partner of www.gambitrader.com
Thanks for the great updates. You've been a real inspiration. Pete
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