📈 Index Issues

This indicator causes concern...

Rate of Change Indicator

The rate of change indicator is very simple and is something I use to orient myself on all types of charts to get a high level understanding of where we are at.

Rate of change tells you the percentage change in price over the specified time period you are looking at (daily chart, weekly, etc.). You can use rate of change to find divergences and support/resistance areas to identify bounce opportunities and rejection levels.

You can see right now on the Nasdaq we have a negative divergence with regards to rate of change, which is obviously not what you want to see.

We need to see some stabilization in rate of change and to get up over the 0 line.

On the S&P, we are just starting to crack the 0 line and we do have a negative divergence, though not as severe as on the Nasdaq.

Until we are over the 0 line, I would expect to see selling.

The Russell, while also dropping, tells a different story. We are well above the 0 line but reached a resistance level. This tells us that the massive buying we saw earlier in the week was at an unsustainable pace and we are simply taking some time to cool off.

Of the indexes, I still favor the Russell and small caps from a technical and fundamental standpoint.

For more analysis of the indexes and how to use rate of change to your advantage, watch this video: