#MarketTiming – “a gift for the bears”…

I expect the market to go down tomorrow.

Really? Why?

Long-term breadth, as measured by the McClellan Summation Index (the $NYSI) is declining, and today short-term breadth, as measured by the McClellan Oscillator (the $NYMO) turned down after basically a four-day bounce in the market, but more importantly, timing-wise, this NYMO pattern is more than the usual turn down.

In this case it is a “high below a high below the zero line.”

And whenever this happens I believe it is a gift for the bears.

Take a look at the blue vertical lines on the chart below, which mark each time this pattern has repeated in the past six months. Focus on what happens next. It is always what happens next in the market that matters — not many indicators are consistent as this one – a sell off every time and usually hard downs the next day (tomorrow).

In addition, the SPX and Nasdaq Comp both clicked down today (to state the simply obvious, every dip or swing or slide or whatever the market wants to do to the downside has to begin with one down day), and VIX, after four days down, clicked up, giving its own first-day sell signal. Furthermore, my nifty-50 stock list which has 41 stocks on sells a week ago Wednesday rallied to 42 on buys yesterday before clicking down to 39 on buys today. CNN Money’s “Fear and Greed Index” is at a “greed” level trying to diverge with the rally highs. AAPL, by far the most important stock in the market and one capable of triggering a sell off all by itself, gaped up today on top of a five consecutive days up, but then sold off below its open (putting a black candle of indecision at a high on its chart).

But more important than any of that in my expectation is high below the high below the zero line, the gift for the bears, a gift in bull markets let alone in what may now be a bear market.

Okay, what if it doesn’t sell down? Well, that will be particularly bullish and I’ll take that up when and if it goes that way. As Trader Vic Sperandeo would say “if the market doesn’t do what’s expected, it usually does the opposite twice as much.”

(click on the chart for a larger view)

2 thoughts on “#MarketTiming – “a gift for the bears”…

    1. The blue line is just the day another high below a high below the zero line on the NYMO, short-term breadth.

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