Sunday, February 10, 2008

NYSE McClellan Oscillator - 2/8/08

There's not a whole lot to say here, the MCO is at a point of indecision near the zero line, it (and the markets) could go either way :-) As that great sage said, "the markets will fluctuate."

From the bullish point of view, it would probably be better if the next short term move was down. This could complete a retest of the recent lows and IF the 10% component of the MCO stays above -500, everything would be hunky-dory.

If we see a rally next week it could take the MCO back into overbought territory. The outcome of this would depend again on the 10% MCO component: if the 10% index goes above +500 it is a bullish indication the market will continue moving higher after any overbought correction. This may not occur at this point and after a stab higher the markets could pull back to retest the lows.

The Summation Index at the bottom of the chart is an intermediate term timing indicator. The summation index is the sum of the area under the MCO indicator, ir rises when the MCO is positive and declines when the MCO is negative. Since it is a sum, when it is above the zero line, it indicates that the markets, (as measured by the A/D issues) are have a positive bias and are rising when viewed from an intermediate term perspective. When the Summation index is below zero, the general trend is down. While the Summation Index is currently above the zero line and rising (because the MCO is positive) it is not really a clear indication for the intermediate term. The Summation Index could easily turn negative here in a period of a few days.

In short, this is a traders market.I do feel it is a reasonable buying opportunity for selected issues where one has done the proper due diligence and can stomach the possibility of short term price volatility

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