Short-term Momentum Indicators Show Bottoming Signs

In addition to studying price moves, there are two simple technical indicators I focus on to build a technical view of any market or security. My goal is to select indicators that can help address the question most investors and traders face which is are markets or securities at a turning point, and if so, is there a shift in leadership?

Momentum indicators, such as RSI, MACD, stochastics and many others, help identify extremes and turning points in the market, and relative performance versus the S&P 500 helps identify shifts in leadership within the market.

Today, I’m focusing on momentum indicators because both the long and short-term momentum cycles that are important things to watch. First, our longer-term cycle work continues to suggest the March lows defined another 4-year cycle low right on track from the prior cycle low four years ago in Q1 2016. Weekly momentum indicators, which help track 1-2 quarter shifts, are still building positively from the oversold levels reached in March.

While they are no longer early in their up move, they have yet to reach overbought levels or to peak. Lastly, and the reason for today’s note, short-term indicators, tracking 2-4 week shifts, are showing early signs of bottoming after peaking in overbought territory two weeks ...
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