Two Charts Say the Market Rally Is Coming to an End

The stock market has had a great run this month. But it looks like the rally has just about run its course.

 

Many technical indicators are showing negative divergence right now. In other words, as the S&P 500 has been making higher highs on the chart, the momentum indicators have been making lower highs. That's "negative divergence," and it's a strong warning sign that the rally is nearing an end.

 

So now is not the time to bet aggressively that stocks are going to keep pushing higher. But it's probably a good time to make a bet on the short side of the market.

 

Here's a 60-minute chart of the S&P 500 as of Tuesday's close, plotted along with three momentum indicators...

 

 

For the past week, the S&P 500 has been rallying and making higher highs on the chart. But the MACD momentum indicator and the five- and 14-day relative strength indexes (RSIs) have all been making lower highs.  (more)

Please share this article