This chart looks like a mess but there is a method behind this madness. Essentially the blue arrows show when the McCllellan Oscillator peaks after a period of bullishness. Even after this indicator peaks the initial momentum required to get the indicator to new highs will fuel the markets advance while this indicator starts to falter. This sets up negative divergence and the markets absolutely will not go lower until that happens. It doesn’t mean that the markets have to sell off, but it has to happen before the markets can correct.

That scenario has officially taken place. The markets have moved higher this week while the $NYMO moved lower. We could move higher this week, but time is running out for the indexes, and a period of consolidation would be very healthy for a potential run at the April highs.

Watch for the TRIX to cross down through 0 to signal that the rally could be in danger of faltering.

dow

One Response to “McCllellan Oscillator is Slowing”

  1. Prof_it Says:

    And the name given to the indicator of your lagging momentum is $NYSI – it’s an exponential moving average of $NYMO.

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