$S&P 500(.SPX)$ thoughts: Momentum Interruptions. Momentum has been the market's best friend from November through year end. This is being subtly interrupted.
In the lower panel of the chart is the Percentage Price Oscillator. This oscillator offers a quick insight into trend momentum. The red dots within the panel signify negative crossover events, a slowdown in momentum.
In my analysis, momentum interruption occurs when the initial negative crossover is not succeeded by a corrective price move. Instead, price continues to climb with successive negative crossovers, creating a pattern of interruptions. Based on my observations, the decline that follows such an interruption cycle tends to erase most of the earlier advance.
Previous instances are marked in August 2021 and July 2023 where the index rallied 5% as momentum decelerated. An intriguing resemblance to the current day.
A comparable outcome brings the index down to 4550. Like this one, most technical indicators are already extended. When you stack in the extreme greed sentiment, elevated equity exposure among retail & professional participants this near term decline becomes a favorable speculation.
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Greatread🙌🏾