Ominous Signs Linger Ahead

One of my favorite measures of market health is looking at the advance / decline line both on an intraday basis and cumulatively. It’s no surprise then that the McClellan Oscillator ($NYMO) is one of my favorite measures for this and I want to point out the recent weakness we’ve been seeing here. NYMO_5_13

Going back to May 3rd, we’ve been getting warnings signs from this oscillator that we’re seeing some deterioration in the stock market. Notice how we are below the zero line and holding moderately negative levels as the market indices gyrate around the middle of their recent ranges.

Now let’s take a look at the S&P500 ($SPY).


Here we see the potentially deadly head and shoulders pattern forming with a neckline at 204.

Does it mean this pattern has to trigger? No it does not.

Anything can happen, including improvement in breadth. But right now the patterns and clues are suggesting we could have some danger ahead.


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Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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