Saturday, June 16, 2012

Tom McClellan: Bulls in Charge

As of June 15, 2012, the NYSE's McClellan A-D Oscillator has risen up to an overbought level.  But not all overbought conditions are created equal.  There is context to be found in the way that it is done.

There is a rule that we use when interpreting the Oscillator's structure: The complex side is the strong side.  What I am referring to is a complex structure that is entirely above or below zero, with lots of chopping up and down but without a crossing of the zero line.  When you see that, the message is that whichever side of zero it is forming on is the side that is in control.  So a choppy complex structure above zero means that the bulls are in charge, whereas a complex structure below zero means that the bears are in charge.