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Quick Update: McClellan Oscillator Peaks Again at Trader’s Narrative

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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:

nasdaq mccellan oscillator March 2009

And a comparison of the chart with the S&P 500 index (SPX):

S&P 500 index comparison to mcclellan oscillator Mar 2009

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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5 Responses to “Quick Update: McClellan Oscillator Peaks Again”  

  1. 1 TheTraderBlog

    Great stuff - but different this time? I am looking for the rally to fail as well, but this one may last for quite a while longer. But in any event it will fail, and the worst is yet to come.

  2. 2 Vin

    Thanks for the update Babak.

    Oil appears to have peaked, indicators you’re showing looks peaked, mark to market news coming next week but market can sell on the news, I wonder if this rally is over..

    Please look at the attached link, Chart of the Day - S&P Earnings:

    Chart shows real earnings at same levels since 1930-40’s. S&P 500 was in double digits at that time.

    Do you see us going below 666?

  3. 3 Peter

    Great call! Thanks!

  4. 4 Jon Stoski

    Sell Sell Sell!

  5. 5 Sarb

    Jon stoski

    do you have access to securities trader in U.S. or Europe for MTN or Other paper

    Please contact me please

    Thank you


    44 7878669360

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