Welcome to our Momentum Monday newsletter.
Remember: In Stockopedia momentum doesn’t just mean price moves (though it is a big part of it.)
Just to refresh your memory Stockopedia’s Momentum Rank is a ranking system based on a blend of price momentum and earnings momentum in the form of upgrades, positive revisions to earnings and earnings surprises to learn more read here https://www.stockopedia.com/le... this report we pay no attention to the factors of Quality and/or Value. However, when combined with either of these two factors, an analysis of the charts can be a powerful strategy, if applied with discipline.
Week ended 09 Dec 2022
Last week we saw markets take a breather from what had in general been an aggressive move to this point.
* The reason for looking at the US S&P500 chart is because it plays such a large role in the sentiment of the broader Bourse and therefore it can’t be excluded from broader consideration.
S&P500 (US)
A pull back from the top end of the downward channel is enough to remind us that we are not out of the woods yet when it comes to the broader downward move on the S&P500.
Though we are better placed here than a few weeks ago, the obvious risk is that there is a continuation back to the bottom end of the channel which may take us to ~3300-3400, which coincidently is a structural support level, formed back in October 2020 while the market clawed out of the COVID correction.
Assuming that the pullback is an orderly one, a break up above 4280 is still necessary to prove that there may be a reversal of a trend occurring. As mentioned last week, the level of 3903 would be a nice pullback zone. Failure to hold that level could see the levels mentioned above tested next.
Pleasing the MACD is still in positive territory, notwithstanding that the pullback last week has seen a slight convergence in the MA indicators.
The RSI has dipped below 50 again which is unsurprising. The RSI can be quite volatile as a single measure. On a two week average basis the line has consistently stayed under 50 since March, further underlying the move down.
As mentioned last week, investors need to be cognisant of these risks, particularly as the US market plays such a large…
