I read about this indicator in a book by Tim Hayes of Ned Davis Research - I use it a bit differently though. When 6 month momentum is negative, that's a negative for the Stocks too. The indicator is modal so the higher the momentum the more bullish the signal, more negative = more bearish for stocks.
I've also noticed that long term trends correlate nicely with stocks - I use the 50 day MA against the 200 day MA. If you look at a long term chart you'll notice that when both signals are negative, it's bad news for stocks and vice versa.
In the chart below, 6 month momentum dropped into negative territory for a spell and bounced back up. The 50 day smoothing continues to fall though. Watching this closely.
Please note, this is a long-term to intermediate term indicator. The signals aren't very useful for short term timing but it helps in determining the monetary factors that weigh on the market.
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