Momentum Slants Negative on the Dow

Dec 17, 2007: 10:31 PM CST

With inflation concerns picking up, and an economic slowdown virtually a certainty, the US stock market indexes are looking far worse (for the future) than they did at the start of 2007.

Let’s look quickly at the momentum development on the Dow Jones:

Of interest to this chart, note the following regarding the oscillator at the bottom:

  • Price etched out a New Momentum Low, hinting that new price lows are yet to come
  • Momentum printed a Negative Divergence, meaning that new price highs were made on lower momentum readings, forecasting lower prices
  • “Momentum” is now in a downtrend and a down-channel, another bearish development

Momentum tends to lead price, and if that premise is true, then one can only surmise that lower prices are ahead for the US Indexes.

While there are 101 ways to interpret the US Stock Market, this is just one of them, and the readings from momentum have clearly turned negative.

The bulls (buyers) are losing momentum while sellers are gaining it, and the supply/demand imbalance is now shifting to the sellers it appears.

Time will tell, but do be careful if this is indeed the case.

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