Second Day of Overbought McClellan Readings Triggers a Short-term Sell

The NASDAQ/NYSE Volume Ratio closed at a high 1.87 Wednesday, a sign of
lopsided speculative participation. Readings this high have typically preceded
lower stock prices over the short-term (see my May 4th column).

The NYSE McClellan Oscillator held above the +150 level for a second
consecutive session, triggering a short-term sell signal. As I recently
pointed out in my July 23rd column, two consecutive readings in overbought
territory (+150) typically leads to a lower S&P by the time the McClellan
falls back under +100.

If the SPX is still trading above 1284 at Friday's close, an intermediate-term
bullish signal will be triggered (given that the S&P managed to hold firm in
the three sessions following a 3:1 positive breadth day.) But considering the
stretched condition of the market, it appears that the more likely scenario is
range-bound trade, and we're currently pressing the upper end of that range.

Categories : Archived EOD Commentary, End-of-Day Commentary

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