Stocks Surge, Pushing the McClellan Oscillator into Overbought Territory

The S&P500 closed up nearly 3% Tuesday as buying power resurfaced. Breadth
closed in 3:1 positive territory and volume associated with advancing issues
accounted for over 80% of total NYSE volume. NYSE TICK action was positive,
with TICKscore settling at +11 and Cumulative TICK at +52,000.

Tuesday's lopsided breadth sent the NYSE McClellan Oscillator over +150 for a
second time in the last five sessions. Readings over +150 are high from a
historical perspective (see long-term chart). It's particularly interesting
when the Oscillator exceeds +150 on two separate occasions within a one-week
time frame. Typically, the second run from below +150 to above +150 coincides
within a short-term topping phase, and the S&P is usually trading flat-to-down
three days later. That's where we stand as of Tuesday's close...

McClellan Oscillator Exceeds +150 Second Time in Five Days
08/05/08... S&P ??? three sessions later
01/31/08... S&P -3.0% three sessions later
10/05/07... S&P +0.3% three sessions later
08/31/07... S&P +0.3% three sessions later
08/24/07... S&P -1.1% three sessions later
08/03/06... S&P -0.7% three sessions later
07/11/06... S&P -2.9% three sessions later
07/06/06... S&P -0.1% three sessions later
12/01/05... S&P -0.1% three sessions later
06/01/05... S&P -0.4% three sessions later
05/27/05... S&P +0.5% three sessions later
05/23/05... S&P +0.3% three sessions later
05/09/05... S&P -1.7% three sessions later
09/07/04... S&P +0.2% three sessions later
09/02/04... S&P -0.2% three sessions later
08/27/04... S&P -0.2% three sessions later
09/08/03... S&P -1.5% three sessions later
05/06/03... S&P -0.1% three sessions later
04/22/03... S&P -1.4% three sessions later
08/15/02... S&P +0.8% three sessions later (*)
03/06/02... S&P +0.5% three sessions later
01/03/01... S&P -3.8% three sessions later
01/07/00... S&P -0.6% three sessions later
04/21/99... S&P +1.8% three sessions later (*)
10/29/98... S&P +2.3% three sessions later (*)
09/28/98... S&P -5.9% three sessions later
09/22/98... S&P +1.5% three sessions later (*)
07/08/98... S&P -0.1% three sessions later
07/06/98... S&P +0.1% three sessions later
05/12/97... S&P +0.5% three sessions later
02/11/91... S&P -1.2% three sessions later

Out of 30 separate occurrences since 1990, only 40% led to a higher S&P three
sessions later, compared with 55% at-any-time odds. Since 2000 the limited
upside potential has been ever more noticeable, with only 32% of cases leading
to a higher S&P three sessions later.

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

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