These Momentum Indicators are Completely Absurd

Momentum Indicators

Greetings from Chicago, where I’m trying to unload a rental property before this insane market decides to turn a corner on me. The last time that the housing market was this hot was three years ago. And right when we put up this condo, the market went sideways. Fitting, as we had to rent it out at a loss for three years. But now, with leases ending and inventory low, here’s hoping that this condo finds a new owner in short time.

There’s something else very interesting about this time three years ago. It’s when we started to see the market get very overbought. And sure enough, within a few months, we saw a deep contraction in the S&P 500. Now, I want to show you just how bullish investors are right now. Or at least how committed they are to squeezing every penny of upside until there’s nothing left.

Analyzing SPXL and Momentum Indicators

The chart below is for a ticker SPXL. This is the S&P 500 Triple Bull ETF (NYSE:SPXL). It uses 300% leverage to generate higher returns based on the underperformance of the SPDR ETF (NYSE:SPY).

It has entered overbought territory for the first time in three years. Now, as you can see, history shows that a committed rally and overbought conditions can last for an extended period – in some cases months and in special cases up to a year.

But when you combine the Relative Strength Index with several other momentum indicators, you start to just how overbought conditions have become.

Momentum Indicators

The last time that the Money Flow Index, Ultimate Oscillator, and RSI were this high, it was back in 2018. That was right before a sharp pullback that bottomed out in mid-2019. The euphoria is real. I will let you know when momentum in the market goes the wrong way and what to do next. This is going to get bumpy.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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