A look at market technical indicators (after three months)


Three months ago, I wrote an article titled "Are we looking at a rebound in the stock market soon?". In the article, three different indicators (Fear & Greed, Smart Money Confidence, Consumer Spending) are explored.


When the article was first published in mid March, S&P 500 stood at 4204. The few indicators explored back then indicate there should be a rebound in the market soon. True enough, the market rebounded in the 2nd half of March and closed at a high value of 4631 during late March.


It was also indicated that the overall downtrend might still remain intact even if a quick technical rebound was to happen.


That did happen. The S&P 500 closed at 3900.86 this Friday.


Given three months have passed since the article was published, now is probably a good time to review these indicators again.


Fear and Greed Index


(Source: https://edition.cnn.com/markets/fear-and-greed)


This is a slightly higher score than the score of 14 which we saw three months ago. Below is how the score pans out over the past year.


(Source: https://edition.cnn.com/markets/fear-and-greed)


An extreme new low was reached in May with the score once hitting 8. Since the start of April, the market is mostly in either "Fear" or "Extreme fear".


Smart Money Confidence


(Source: https://sentimentrader.com/smart-money)


The Smart Money Confidence is now above 0.7. Traditionally, S&P 500 has an annualised return of 35% when this happens. Three months ago, the Smart Money Confidence was also above 0.7. Not much has changed since then.


Consumer Spending



Refer to this article if you are wondering what this indicator is about.


This is by far my favourite indicator as it has accurately pinpoint the dive in the market in January. It is usually a lagging indicator so you won't be able to catch the absolute bottom with this indicator. It does however usually signifies/confirms a change in overall trend so this is still very useful. Three months ago, the ratio of RCD/RHS did not cross above the 70-day moving average. Till date, the crossing still has not happened. As you can observe from the graph above, we are still very much in a downtrend.


Conclusion


Overall downtrend is definitely still intact. Long term wise, buying the indexes at such levels (as indicated by Fear & Greed index and Smart Money Confidence) usually do reap benefits. However, further pain in the market is expected until a confirmation of uptrend can be made from the Consumer Spending indicator.


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