MCO Update 5/18/12

We have experienced a general breakdown in this indicator which now indicates the markets need some time to reestablish confidence before a n extended move higher can get underway. While I do not expect it to occur a waterfall decline is still possible. Caution is warrented.

Click to Enlarge A long term view of the market with the MCO and SUM Indexes. We are very oversold on the MCO and should expect a bounce by Tuesday at the latest. The breakdown is severe enough that I believe we need another two weeks to establish a base again before looking for a reliable reversal.

MCO update - dicey but constructive

The last few trading days were a little rougher than I expected but I still expect the markets to work out a positive reversal here. The Climatic Volume Indicator has been in the -25 to -50 area the last four sessions and todays last hour of trading looked like a reversal to me. The SUM Index will probably violate its 13 day moving average tomorrow but this appears like it's a retest from above, a bump and run. Nothing is written in stone but with sentiment so bearish it looks bullish to me.

The SPX for 12/05/06
Click to enlarge