It’s an alert for investors who pay attention to price chart indicators.
It’s an alert for investors who pay attention to price chart indicators.
These amount to the distant early warning system of technical analysis, nothing more. When the price keeps going up but the momentum measures begin to stop going up, it might be time to begin thinking about what comes next.
The NASDAQ 100 index this week hit new all time highs and then backed away a bit on Friday. You can see the divergence now forming between the price peak and these key indicators of momentum:
This week’s new closing high exceeded the previous higher high in early June, before the index faded into the weekend. If you examine the relative strength indicator (RSI) above the price chart, you can make out clearly how it’s negatively diverging from price movement. It’s the same look with moving average convergence/divergence indicator below the price chart: higher price, lower indicator.
MicrosoftMSFT stock looks like this on the daily time frame:
This major component of the NASDAQ-100
NDAQ rallied furiously off of the mid-March lows to all time highs — and yet both basic momentum indicators are lower at this week’s price peak than at the February peak.
