Market Momentum Hits Polar Extremes As Stocks Test Bull Trend

Chris Kimble

The latest stock market correction and swing lower has seen momentum drop to extreme lows (on a intermediate-term basis).

This poses a bit of a conundrum because stocks have been struggling since hitting historic longer-term momentum highs.

So what do investors make of this going forward?

Let’s look at a couple of four-pack charts.

The first 4-pack of charts looks at the “daily” Equal Weight S&P 500, Russell 2000, Dow Transports and NYSE Composite. All of these important stock indexes are in horizontal trading ranges with momentum at the lowest levels in the past couple of years.

This has helped stocks bounce nearly 8 percent off the lows.

Stock Market Index “Ranges” (support at momentum lows)

stock market indexes correction testing range support bottom_9 november 2018

The next 4-pack of charts is a longer-term look at “monthly” bars for the Equal Weight S&P 500, Russell 2000, Dow Transports and NYSE Composite.  In addition to testing the bottom of their trading ranges, the stock indexes are also testing 8-year+ rising support at each (1)… with momentum at/or above 2007 levels.

stock market indexes momentum at 2007 levels in year 2018 bearish correction chart

How these two timeframes reconcile will be important for investors.

If support at each (1) would give way, monthly momentum has a long way to go to get oversold. From a big picture perspective, the support test a (1) could be huge!

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