Wednesday, April 7, 2021

Momentum, meet bullish sentiment

Mid-week market update: What should traders make of this stock market? On one hand, the S&P 500 is exhibiting strong positive price momentum. Not only is the index trading above its daily Bollinger Band (BB), it's trading above its weekly BB. In the last 10 years, there have been eight occasions when the S&P 500 was above its weekly BB. Most (five out of eight) of those instances were associated with sustained advances indicative of positive price momentum. The market corrected in three of the eight occasions, but in one of the three corrections (in early 2018), the upper BB ride persisted for three weeks before the market exhibited a blow-off top. That's what strong price momentum looks like.

On the other hand, short-term sentiment is off-the-charts bullish, which is contrarian bearish.

The full post can be found here.

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