Friday, January 2, 2009

Bye bye 2008- Hello 2009

In thin holiday trading the McClellan Oscillator made a sharp move higher, I would interpret this as bullish. While we can expect a pullback within a few days, the current expansion in market breadth is a positive indication and suggests the current rally will continue for a few more weeks at a minimum.

The McClellan Oscillator for 12/31/2008
Click to enlarge

So far today we are seeing a remarkable development. If the market breadth stays in the current range with advances exceeding declines by about 1600 it will make the MCO (McClellan Oscillator) print a new high for the move. This is confirming the price behavior and is similar to seeing the MACD go to a higher high during a rally, i.e it's now impulsive and not just an oversold bounce. This is potentially much more bullish than I initially expected and may be signaling that a major market reversal is in progress. As I have noted before, this is an unusual market and we need to see further confirmation over the next few weeks.

adv 2358
dec 660
A-D diff 1698 <== if this stays above 1590 then the MCO > 320 which was the old high
the 10% 586.14
the 5% 259.51
the MCO 326.63 <== currently at a new high for the year

Update at 3:05 PM Friday Jan 2.

adv 2913
dec 651
A-D diff 2162
the 10% 632.54
the 5% 282.71
the MCO 349.83

If these numbers hold we are in a new bull market.

To be safe we need to watch what happens in the next major correction which takes the MCO down to or below the -100 level. If the %5 index can stay above -500, we will have confirmation for a reversal of one of the nastiest bear markets in history. We're not there yet but close.

Update at 4 PM Friday Jan 2.

Confirmation at the close, odds are that we are in a new bull market

adv 2959
dec 697
A-D diff 2162
the 10% 632.54 <== Above +500 = Impulsivly Bullish
the 5% 282.71
the MCO 349.83 <== NEW HIGH

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