Mind the McClellan
Monday, December 28, 2009 at 03:43PM Refreshed am I, who walked away from my trading terminal for the last 4 days, to enjoy peace, quiet, and a little holiday mayhem. I raise my glass and salute you, hoping the holiday's were as good to you as they were to me.
Coming back to the market wasn't as cool as I'd hoped, with the exception of some big continuation out of one of my top performing positions, NEP. I picked up a bundle when it was trading with a $5 handle, only to see it punch into the $9's today. I love option-like returns in my stock positions. Especially over the course of 12 days.
However, I'm not writing today to spread my holiday cheer, boast of recent picks, or waste time trying to pick apart today's session, which really had no important themes or set-ups. I'm here to gently warn of what might be up around the corner.
I've taken on some bearish positions off and on over the course of the year, but lately, I haven't taken on much at all. I haven't bought puts on a stock in months. There hasn't been any reason to. Lately, despite most of the range bound activity in the equity markets, my good old friend "McClellan" has been slowly and steadily ascending to levels not seen very often over the last year.
The former extremes came in during the late July and mid-September equity peaks. These signals in the McClellan forecasted 4-5% decreases in equity prices respectively.
Like I said, I've enjoyed riding the trend higher, but as the week wears on, I'd be using strength in stocks to take profits, rather than putting on new positions. Get me a little closer to the New Year, and I might celebrate with a handful of put positions, which I haven't traded in some time, looking for a little market correction. The higher that McClellan reads, the more comfortable I am being net short stocks.
This should make for an interesting transition. If the S&P's reach 1130, and the McClellan reaches a reading of 70 (give or take), I'd wager on a print of 1075 in the S&P into the 3rd week or so of January. At which point, I'd be a buyer again.
It's a little early to be setting that up, but if stocks continue to cruise higher into Thursday, I'd be pretty comfortable switching my stance.
Let's hope the market gives me a little more to talk about tomorrow.
OA
Reader Comments (3)
OA: Thanks for pointing this out.....Looking at the $NYMO/$SPX correlation from July & Sept. pullback to $SPX1075 looks almost certain
Regards
akini55
Happy New Year, btw - congrats on your great year; my year was not as great as yours. That said, for all my accts, from ROTHs, IRAs, cash accts, & grandkids ed. accts, I am holding on to 76% gain for the year – could have been better but, I did some bone head moves the first of the year. Regardless, I am very happy with my results.
Anyway, back from the Bay area, did some skiing, did the Emerald Bowl and then brought the grandkids back to Arizona to do some quad riding up to an area known as Crown King. For what-ever it’s worth, I tell you all this cuz, I have not done any real trades over the last few weeks – for me, my family is much more important than trading plus, nothing is better than being a grandpa & having fun.
Anyway, doing some searches tonight, with the RSI > 90 which gives me some great short ideals. So, my plan, with the grand munchkins leaving Wed., I might add a positions on Thursday.
To that end, I tip a glass for a great and prosperous 2010 for everyone.
Thanks Jeff, I'm trying to figure out how I missed the late Oct. Mcclellan low!
Bob