With Oversold McClellan, Watch the Down Volume Percentage
By
Rennie on Wednesday, January 27th, 2010 at 3:18 pm
With decliners still leading advancers by over 500 issues heading into the final hour, the NYSE McClellan Oscillator appears set to close below -200 for a second consecutive session (it will close below -200 as long as breadth settles in negative territory). When the market is consistently oversold, it’s worth looking at market internals such as the Down Volume percentage for signs of waning downside momentum. Currently, down volume accounts for 55% of total NYSE volume, down from 68% on Tuesday. Listed below are each of the last thirty instances in which the NYSE McClellan Oscillator closed in extreme oversold territory (<-200) two consecutive days and the NYSE Down Volume percentage contracted from the previous session. This highlights days in which the market is severely oversold and in the process of losing downside momentum…
NYSE McClellan <-200 Second Day, Down Volume % Contracts
11/02/09… S&P500 +0.4% two sessions later
10/29/09… S&P500 -2.2% two sessions later
10/27/09… S&P500 +0.3% two sessions later
10/02/09… S&P500 +2.9% two sessions later
09/02/09… S&P500 +2.2% two sessions later
06/23/09… S&P500 +2.8% two sessions later
06/17/09… S&P500 +1.2% two sessions later
03/06/09… S&P500 +5.3% two sessions later
03/03/09… S&P500 -2.0% two sessions later
11/20/08… S&P500 +13.2% two sessions later
10/10/08… S&P500 +11.0% two sessions later
10/08/08… S&P500 -8.7% two sessions later
07/03/08… S&P500 +0.9% two sessions later
06/27/08… S&P500 +0.5% two sessions later
06/24/08… S&P500 -2.4% two sessions later
06/12/08… S&P500 +1.5% two sessions later
11/20/07… S&P500 +0.1% two sessions later
11/12/07… S&P500 +2.2% two sessions later
08/16/07… S&P500 +2.4% two sessions later
08/01/07… S&P500 -2.2% two sessions later
07/27/07… S&P500 -0.3% two sessions later
07/25/07… S&P500 -3.9% two sessions later
05/18/06… S&P500 +0.0% two sessions later
10/13/05… S&P500 +1.1% two sessions later
03/23/05… S&P500 +0.2% two sessions later
05/10/04… S&P500 +0.9% two sessions later
04/30/04… S&P500 +1.1% two sessions later
04/15/04… S&P500 +0.6% two sessions later
08/06/03… S&P500 +1.1% two sessions later
06/24/03… S&P500 +0.2% two sessions later
In 23 out of 30 occurrences, or 77% of the time, the S&P closed higher two sessions later, significantly above the 53% at-any-time odds for a higher S&P two days later in the same time frame. One caveat is that when wrong, losses have averaged a hefty 3% over the two-day period. I’d also note that with the BKX currently up over 2% and the SPX slightly lower, the BKX/SPX divergence discussed this past Sunday will go into effect, suggesting the potential for an outsized move over the next couple of days. A close above OEX 502.35 today would fulfill the overbought VXO setup discussed Sunday and leave mixed signals on the board, but the McClellan setup would suggest that further weakness on Thursday could be a short-term buy. A close below OEX 502.35 would reinforce that outlook.
With Oversold McClellan, Watch the Down Volume Percentage
By Rennie on Wednesday, January 27th, 2010 at 3:18 pmWith decliners still leading advancers by over 500 issues heading into the final hour, the NYSE McClellan Oscillator appears set to close below -200 for a second consecutive session (it will close below -200 as long as breadth settles in negative territory). When the market is consistently oversold, it’s worth looking at market internals such as the Down Volume percentage for signs of waning downside momentum. Currently, down volume accounts for 55% of total NYSE volume, down from 68% on Tuesday. Listed below are each of the last thirty instances in which the NYSE McClellan Oscillator closed in extreme oversold territory (<-200) two consecutive days and the NYSE Down Volume percentage contracted from the previous session. This highlights days in which the market is severely oversold and in the process of losing downside momentum…
NYSE McClellan <-200 Second Day, Down Volume % Contracts
11/02/09… S&P500 +0.4% two sessions later
10/29/09… S&P500 -2.2% two sessions later
10/27/09… S&P500 +0.3% two sessions later
10/02/09… S&P500 +2.9% two sessions later
09/02/09… S&P500 +2.2% two sessions later
06/23/09… S&P500 +2.8% two sessions later
06/17/09… S&P500 +1.2% two sessions later
03/06/09… S&P500 +5.3% two sessions later
03/03/09… S&P500 -2.0% two sessions later
11/20/08… S&P500 +13.2% two sessions later
10/10/08… S&P500 +11.0% two sessions later
10/08/08… S&P500 -8.7% two sessions later
07/03/08… S&P500 +0.9% two sessions later
06/27/08… S&P500 +0.5% two sessions later
06/24/08… S&P500 -2.4% two sessions later
06/12/08… S&P500 +1.5% two sessions later
11/20/07… S&P500 +0.1% two sessions later
11/12/07… S&P500 +2.2% two sessions later
08/16/07… S&P500 +2.4% two sessions later
08/01/07… S&P500 -2.2% two sessions later
07/27/07… S&P500 -0.3% two sessions later
07/25/07… S&P500 -3.9% two sessions later
05/18/06… S&P500 +0.0% two sessions later
10/13/05… S&P500 +1.1% two sessions later
03/23/05… S&P500 +0.2% two sessions later
05/10/04… S&P500 +0.9% two sessions later
04/30/04… S&P500 +1.1% two sessions later
04/15/04… S&P500 +0.6% two sessions later
08/06/03… S&P500 +1.1% two sessions later
06/24/03… S&P500 +0.2% two sessions later
In 23 out of 30 occurrences, or 77% of the time, the S&P closed higher two sessions later, significantly above the 53% at-any-time odds for a higher S&P two days later in the same time frame. One caveat is that when wrong, losses have averaged a hefty 3% over the two-day period. I’d also note that with the BKX currently up over 2% and the SPX slightly lower, the BKX/SPX divergence discussed this past Sunday will go into effect, suggesting the potential for an outsized move over the next couple of days. A close above OEX 502.35 today would fulfill the overbought VXO setup discussed Sunday and leave mixed signals on the board, but the McClellan setup would suggest that further weakness on Thursday could be a short-term buy. A close below OEX 502.35 would reinforce that outlook.