Monday, January 25, 2010

MCO update

The markets had a solid run for the first two weeks of January and are taking a pause to refresh. There's a good chance the old 55 day trading cycle is coming back in force with a potential low date on Monday or Tuesday.

Fridays trading action saw an attempt to reverse the decline in the afternoon, the McClellan Oscillator intraday was near the -300 level, but the traders who jumped the gun anticipating a reversal were kicked in the groin late in the afternoon. Regardless, the MCO suggests we have a setup for a reversal Monday or Tuesday. Even though the MCO is in the oversold area at -243, the 5% component is still positive. This is typical of corrections in a bullish market.

At this point before I get more bullish, I'd like to see a little zig-zag in the MCO or a bounce and retest of its low with the 10% component holding above the -500 level. After a bit of fiddling around I expect the SPX to tack on another 15% and move higher into the 1250 zone.

The McClellan Oscillator for 1/22/10
Click to enlarge

Historical Blogger Sentiment
Source: Ticker Sense
Click to enlarge