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McClellan Oscillator heartens bulls, but market averages won’t break out

Written By | Jun 11, 2019
US stocks down, social security payouts up,bulls or bears, NASDAQ recovery, McClellan Oscillator, purchased money market funds, bank sweep accounts, bank sweeps

Bull and bear. Public domain image via Pixabay.

WASHINGTON. US stocks’ recent bullish ride, coming on the heels of disastrous May trading action, certainly looked like we were in for a refreshing break. The bears had at least stepped to the sidelines, the latest Mexico tariff threat came and went (for now) quite quickly, and all seemed right with the world. Even our old reliable McClellan Oscillator finally popped above the zero line for the first time since… whenever. Meaning it might be safe to start buying stocks again.

Or not.

Mr Market gets confusing. Again

After a feebly bullish open Tuesday morning, all three major averages quickly faded approaching the noon hour. Now, they’re in marginally negative territory. As in roughly 0.15 down.

In other words, it looks like US markets still want to remain trapped in May’s sticky La Brea Tarpits. That’s where they were in May. They kept company weeks with assorted extinct dinosaur fossil remains, oblivious to the weeping and gnashing of bullish teeth across the country.

Tuesday play-by-play

Market-wise, CNBC provides some useful particulars on Tuesday’s Sad Sack midday market action. The headline blames President Trump. But the current iteration of the network’s online report has no mention of the White House.

“Stocks gave back most of their gains on Tuesday as tech shares retraced a rally from earlier in the day.

“The Nasdaq Composite traded just below the flatline, erasing a surge of more than 1%. The Dow Jones Industrial Average was up just 18 points after rallying more than 150 points while the S&P 500 traded just above breakeven.

“The S&P 500 technology sector was down 0.2%, giving back a gain of 1.1%. Advanced Micro Devices and Symantec led tech’s decline, sliding more than 3% each.

“But the Dow remained poised to notch its seventh straight gain. That would mark the 30-stock index’s longest winning streak since May 2018, when it rose for eight straight days. Meanwhile, the S&P 500 is within 2% below an all-time high set in April.

“‘At this point, a failure to break out to new highs would be viewed as negative. The month is only a week and a half old, but we’ve got a head of steam now. We’re seeing evidence of more individual stocks in the S&P 500 making new highs. There’s a bit of an expectations the S&P 500 might be able to test those levels we saw in April,’ said Willie Delwiche, investment strategist at Baird.”

Well, unless we find something to juice this market Tuesday afternoon, Willie might just want to walk that observation back.

McClellan Oscillator looking good. But not too fast, there…

Granted, for us at least, Monday’s closing read of the McClellan Oscillator shows it’s trying to break above this year’s earlier high point, which would be a bullish sign indeed. Particularly for investors who really want to Make America Great Again. A Greatness that includes their recently pancaked portfolios.

McClellan Oscillator, standard version, updated COB 06/10/2019. Wobbling already? Chart courtesy

But until we can see the Oscillator – and the averages – break out from this past spring’s high water mark; and until we can see the averages themselves break out and above their April highs without skittering right back down, the current, weirdly aimless trading pattern promises to continue.

More woes for Allergan

Investor tendency remains wedded to the now familiar mantra of sell, sell, sell. That’s what’s kept the McClellan Oscillator below the 0 point flatline for many weeks. And that attitude also seems typical of our big holding in the cursed pharmaceutical stock known as Allergan (trading symbol: AGN). After a surprise rally last week off its most recent lows, the stock has returned to its previous 2019 pattern of retracing all its recent gains in a search for yet another new yearly low. All on low volume.

Whenever this sad (and badly mismanaged) puppy gains a few points, it seems we always find a few more holders that view this positive action as their cue to head for the exits. Bulls rush in. Occasionally. But any bullishness gets quickly extinguished by another relentless, low-volume wave of selling.

It’s as if investors are finally saying, as one, “Oh, good. A rally. Time for me to get completely out now. Otherwise, I’ll be the last sap left holding the bag and getting ready to turn the lights out.” After tickling the $130 per share mark just a few days ago, AGN is losing once again, down roughly 3 points as we write this, for a roughly 2.5 percent loss.

When I look at management’s consistent record of failure here, I wonder anew whether it’s only stupid people and bad managers who make the big bucks. (Ditto with the politicians on Capitol Hill.) Allergan’s current management team seems to confirm my observations.

Tuesday’s wrap

Bitch, bitch, bitch. It is what it is. But I hate to blunder into a big mistake like Allergan. One that can taint my overall returns over a 1-3 years period. But sometimes that’s what Mr Market hands out.

Back tomorrow. As for today, who knows where our bouncing ball market averages will end up? Or when (and if) the McClellan Oscillator will hit new highs in the green zone.

Logic does not prevail these days.

– Headline image: Bull and bear. Public domain image via



Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17