NYSE Breadth 17:1 Positive, McClellan Oscillator Still Oversold

Follow through is always important after an unfilled upside gap. If S&P futures can trade above Monday’s high of 1161.60 and close higher, that would be a short-term bullish sign. See this March 2nd column for the recent track record of this two-day buy setup. Without such bullish follow-through, there’s reason to question the sustainability of Monday’s gap. The big price gain masked what was actually a muted response among institutional investors. Note the Cumulative TICK closed at a mere +37,000, the lowest readings on an up day in the market in over a month. That’s in stark contrast to last Wednesday’s selloff, when the Cumulative TICK closed at one of its lowest readings ever recorded (-160,000).

Even with today’s near-record lopsided positive breadth session, the NYSE McClellan Oscillator remains in deeply oversold territory at -201. The S&P is off 0.5% since last Wednesday when the McClellan initially closed under -200. Looking back at all instances since 1970 when an oversold McClellan failed to lead to a higher S&P three sessions later, we find the market usually remained under pressure over the next week…

NYSE McClellan <-200, S&P Down 0.5% Three Days Later
05/10/10… S&P500 ??? one week later
01/29/10… S&P500 -0.7% one week later
03/05/09… S&P500 +10.0% one week later
02/23/09… S&P500 -5.7% one week later
10/09/08… S&P500 +4.0% one week later
06/26/08… S&P500 -1.6% one week later
11/12/07… S&P500 -0.4% one week later
07/27/07… S&P500 -1.8% one week later
05/22/06… S&P500 -0.2% one week later
09/02/98… S&P500 -1.0% one week later
07/31/98… S&P500 -2.8% one week later
10/21/87… S&P500 -9.7% one week later
10/25/78… S&P500 -0.5% one week later

Nasdaq futures posted the narrowest range day in ten sessions (NR10), usually a short-term negative price pattern when it coincides with lopsided positive breadth. Since inception of the NDX futures contract, there have been 17 occurrences of an NR10 day coinciding with 2:1+ positive NASDAQ breadth. All but one led to a subsequently lower NDX close (below the setup day’s close) within the next three days…

Nasdaq Futures NR10 Day w/ 2:1 Positive Breadth
05/10/10… ???
08/03/09… Lower Nasdaq close two sessions later
06/04/09… Lower Nasdaq close two sessions later
10/30/08… Lower Nasdaq close one session later
10/20/08… Lower Nasdaq close one session later
08/28/08… Lower Nasdaq close one session later
08/22/08… Lower Nasdaq close one session later
11/23/07… Lower Nasdaq close one session later
01/31/05… Lower Nasdaq close three sessions later
01/14/05… Lower Nasdaq close two sessions later
07/29/04… Lower Nasdaq close three sessions later
05/11/04… Lower Nasdaq close two sessions later
10/15/02… Lower Nasdaq close one session later
05/14/02… Lower Nasdaq close four sessions later
09/28/01… Lower Nasdaq close one session later
11/24/00… Lower Nasdaq close one session later
06/02/00… Lower Nasdaq close two sessions later
04/25/00… Lower Nasdaq close one session later

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

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