S&P 500's Bearish Divergence Could Hit Stocks
Chris Kimble | Aug 09, 2019 01:44PM ET
Does history ever repeat itself exactly? Not so much. Do stock-market patterns sometimes look like momentum patterns? Yes.
This chart looks at the S&P 500 over the past 20 years on a weekly basis, with momentum in the top section.
In 2000 and 2007, weekly momentum started experiencing lower highs, while the market was creating higher highs at each (1). Momentum was experiencing a bearish/negative divergence with the S&P 500 both times. Once support broke in 2000 and 2007, selling pressure took over.
Over the past 20 months, momentum has created lower highs at (2), while the S&P has created higher highs.
The S&P could experience selling pressure if support happens to break at (3).
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