Money Flow Is Signaling A Potential Trend Reversal In Stocks

Money flow is signaling a potential trend reversal in stocks. The Money Flow Index (MFI) is a momentum indicator that measures the flow of money into and out of the market. It’s like the Relative Strength Index (RSI) but incorporates volume, whereas the RSI only considers price. Oversold levels typically occur below 20 and overbought levels typically occur above 80. Friday, the MFI was 57. If the S&P makes a new high or low that isn’t confirmed by the MFI, then this divergence can signal a price reversal. The current MSI does not confirm the recent high in the S&P 500 nor does it confirm the NAAIM 106 reading referenced Friday. In fact while market prices are up over 3% since the beginning of Sept, the MFI is down over 27%. This divergence is a sign of a potential trend reversal.