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Final chance to get in on the book giveaway: Hedge Fund Operational Due Diligence
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At the beginning of the year, fueled by a cocktail of optimism and the famed Santa Claus rally, the market reached for the sky. I pointed out the decade high in the McClellan Oscillator and suggeted that the extremes in this breadth indicator meant that the gravity defying rally was about to lose momentum.
Vin referred to this post recently and requested an update, along with a chart of the S&P 500 index for comparison. Here is the most recent chart of the McClellan Oscillator (ratio adjusted) for the Nasdaq:
And a comparison of the chart with the S&P 500 index (SPX):
I’ve marked the few times in recent history when the McClellan Oscillator has reached an extreme high and how that corresponded with a swing high in the S&P 500 index. Along with the hint that we are again at a peak, is an indication from the McClellan Oscillator of the increased volatility we’re going through in today’s stock market. Exciting to live through and lucrative to trade but leaves your teeth rattled.
In the end, whether this is just another bear market rally or the end of the bear market remains to be seen. But even if it is the latter, don’t expect the market to just rocket higher from here. A realistic scenario would have the market embark on a slow, healing process where we take two steps forward and one step back.
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