Saturday, January 28, 2012

McClellan stock market warnings as S&P 500 retests Fibonacci-doubling 1333

The S&P 500 index ($SPX) retested 1333 this week which is a Fibonacci doubling of the 666.79-ish low it touched in early March 2009. Meanwhile, early warning indicators are signaling to be on watch for a correction in the stock market. The upcoming week may not start a big reversal, but we could see movement that sets up a reversal that will have more effect the following week. The market can move either higher or in a choppy fashion. I've got an old Fibonacci target of $62 for the QQQ so I don't rule out that we'll see it, sooner or later. But both the Dow Industrials and the SPX are having trouble bettering their 2011 highs, and this divergence goes along the the warning that the outlook isn't as rosy as many think.

My annotated chart of the SPX shows the stochastics have curled down, and the 1333 test on Thursday also encompassed a test of 1327 which is a potentially significant Fibonacci price extension. Similarly, 1307 is the Fibonacci .78.6% retrace to SPX's 1370 high of last year, making 1307 a level to watch as well.

Here's the McClellan chart I've configured (at with my markings. The McClellan Oscillator continues to struggle showing negative divergence, and the Summation Index (while high which is generally positive) is now in overbought territory:

And here's the Oscillator chart McClellan shows at their own website, at

Now, here's a quote from McClellan's January 27 "Traders Like QQQ A Little Too Much - Free Weekly Technical Analysis Chart - McClellan Financial", about the Nasdaq 100 ETF, the QQQ, getting ripe for a pullback:

Some sentiment indicators work by analyzing what people say, such as polls and sentiment surveys. Others work by analyzing what people actually do, and I tend to like those more.


The current number of [QQQ] shares outstanding is not at an all time high, but it is the highest we have seen since all the way back in 2006. And it is way above the upper 50-1 Bollinger Band, indicating that traders and investors are getting a little bit too interested in being invested in the QQQ. That overly bullish sentiment condition begs for at least a short term pullback, to reintroduce people to the idea that stock prices actually CAN go down.

See their chart showing and comparing the QQQ price and number of QQQ shares created, and full article describing this, at:

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