Tom McClellan
@McClellanOsc
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Technical Analyst - Editor of The McClellan Market Report. Trying to figure out stock market physics, and to leave my campsite cleaner than how I found it.
Joined February 2010
"Everyone times the market. Some people buy when they have money, and sell when they need money, while others use methods that are more sophisticated." .- - Marian McClellan (1934-2003), co-creator of the McClellan Oscillator and Summation Index
@McClellanOsc Can you share the quote of your mother that you gave on the Marketwatchers webinar. Thanks.
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Attention job seekers. I will not hire any recent graduate of Columbia, because that school is so tainted that I will not be able to trust in the character nor the educational attainment of any of its students. And I furthermore will not hire any older graduates either, because.
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@mczumas Every employer discriminates, and on a large variety of topic categories, e.g. education, experience, face tattoos. Discriminating based on race, sex, religion, and national origin are bad types of discriminating. There are other types that are proper, and useful.
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@terronk @BillAckman The choices a person makes comprise part of "the merits". And it is fair to judge a person based on such choices.
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@MakiaVlo More like Angelouism: "When people tell you who they are, believe them the first time.".
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There has been a lot of discussion lately about breadth divergences of various types, including Advance-Decline Lines, and so I figure that a primer is in order. The very first analysts who ever looked at data on Advancing and Declining issues were Leonard Ayres and James
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Why is 2022 seeing a bear market? Short answer: Liquidity. Fed is taking away the punch bowl, and Congress is taking too much money out of the economy in the form of taxes. Every time taxes go above 18% of GDP (since the 1930s) we have gotten a recession. Every time.
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Lumber futures prices are falling hard this week, as it sinks in that a recession is coming, especially in housing.
The downturn in Austin, TXs housing market is remarkable. Inventory has now spiked to the highest level on record. More than 25% higher than the previous, pre-pandemic high. And the listings just keep coming. Values down nearly 20% already and could have another 15% decline
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A horse walks into a bar. The bartender says, “Look, horse, you’ve been in here every night this week. Do you think maybe you’re an alcoholic?”. The horse replies, “I think not!”, and then, poof, the horse disappears. You’re probably wondering how a horse could just disappear.
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@biancoresearch Speaking as a one-time Army logistics officer, these trucks look like they are getting shipped new from the factory (or the rebuild depot). If it were a unit deployment, there would be a mixture of truck types, and loaded with other equipment, plus with distinctive markings.
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Perhaps this chart will help you understand it better. The 2-year yield knows better than all 400 of the Fed's PhDs.
Totally confused by Fed rate cut decision. Yes, I was in the “no rate cut this year”camp - so clearly wrong - but all we keep hearing about is how good the economy remains and how inflation is coming down. Powell said today “the economy is strong overall”. His words. Now.
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The reason why we have big wars about every 40 years, and major economic wars about every 80, is that all of the people who remember how bad the last one was have died, and so the new "best and brightest" don't have anyone telling them they ought to avoid such things. The U.S.
Remember sitting in class. History. World War I especially. Thinking, “How the fuck did this happen?” We don’t have to wonder anymore.
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@veryzenny I served in the Army for 11 years, and all that time (and since) I have considered myself to be anti-war.
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The correlation between the current stock market and the pattern right after Reagan was elected in 1980 continues to work quite well.
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If it breaks key support, there is going to be real trouble.
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The McClellan A-D Oscillator for the stocks in the Nasdaq 100 Index is now officially "pretty darned oversold".
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If only the climatologists could get outside of their insular models, and look at other categories of data, they might have been aware of the relationship between hurricanes and sunspots.
The U Penn prediction of 27-39 named storms might be the most spectacularly wrong weather/climate forecast in recent history. Hopefully there will be a press release apologizing for this monstrosity.
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I'll tell you why: Because the 2-year T-Note yield says so. And it has a better track record of knowing what the FF Target Rate should be than all 400 of the Fed's PhDs.
Tell me why again there should be an aggressive easing cycle with:.* Real GDP growth at 2.8%.* Core PCE price growth at 2.9%.* Stocks up double digits this year and just off all time highs.* Spreads near secular lows.
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I keep hearing analysts assert that we have dodged the recession this time, and that the inversion of the yield curve did not matter. This misunderstands the 15-month lag.
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Since were "on the verge of Armageddon", it is time to replay this story about the late Mike Epstein, who was a Navy Seal in Korea before the Seals were a thing, a former floor trader, and onetime head of the Market Technicians Association. Events are from 1962.
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Only 14 stocks in the Nasdaq 100 are above their 100-day simple moving averages. This can go lower, but it is officially "pretty darned low".
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For those worrying about the rise in interest rates, know that it is happening right on schedule, and due to end soon, most likely in November. This model looks ahead 5 years, and gets the direction and turning point timings mostly right, except when Fed's thumb is on the scale.
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The spread between the Fed Funds target rate and the 2-year yield is now at its widest point since 2008. That one did not turn out well. It was also this wide back in 2000-01.
2y Treasury yield falling to its lowest since May 2023 this morning
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NYSE's McClellan A-D Oscillator got down to -293 on Friday, Jan. 21, the lowest since the -421 during the Covid Crash 2 years ago. This is officially "pretty darned oversold". It can go lower, but that's pretty hard.
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The weak breadth numbers the past few days have pulled down the NYSE's McClellan Oscillator to a fairly oversold level. It is not the lowest ever, and it can go lower. But it is pretty fun to see an oversold condition in an uptrend, and also in a period of seasonal strength.
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"There's never been a better time to buy stocks." - - Alan Greenspan, New York Times Business Section, January 4, 1973, one week before the start of a 45% decline.
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Stock market has had a good run, but is now arguably overbought. SP500 is extended well above its 50EMA. This chart shows that in a tricky way. Choose PPO as an indicator, then set parameters as (1,50) to show percent deviation from that EMA. Most overbot since just after Covid.
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My controversial take: The Fed cannot really control inflation. If higher interest rates even could fix the inflation problem, they would have done so. The Fed needs to stop thinking that it wields this awesome power to control inflation, with the tools they have. So what can
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The bond market knows. The longer that the FOMC resists, the worse the outcome will be.
Market: Hi Jerome, nice regional banks you got there, pity if something terrible happened to them. still confident you won't cut in March?.
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The Nasdaq 100 Index is off just 1.2% from its recent closing high. But only 53 of its components are above their own 100-day simple moving average. And that number is falling, which is a bearish divergence.
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Fed rate hike cycles typically end when the Fed Funds rate catches up to where the 2-year yield has already gone. We have that condition now. So the Fed should stop, but there is no indication that they know that, based on the post-meeting announcement.
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There are only 2 fundamentals that matter to the overall stock market:.1. How much money is there?.2. How much does that money want to be invested?.This chart shows that there can be a lag in how #1 works.
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The NYSE's McClellan A-D Oscillator finally dropped below its zero line on Jan. 2, after 60 consecutive trading days above zero. This follows a long bearish divergence vs. prices. That divergence is just the setup, not the signal. Crossing zero is the signal (but not necessarily
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The post-FOMC reaction sent the VIX Index up way above its futures, resulting in a deep negative reading in this chart. It did get lower than this during the 2020 Covid Crash, and that one took a few days to end the carnage. Otherwise it is a great bottoming indication.
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This has all been said before, by lots of smart people, but it is worth repeating. Inverted yield curve episodes are followed by rising unemployment 100% of the time.
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NYSE breadth is strong again Friday after the tepid jobs report. They are strong enough to give us a Zweig Breadth Thrust signal if these numbers persist into the close. This signal importantly requires breadth going from bad to really good, within 10 trading days.
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The FOMC is now more than a half point behind the message of the 2-year. The longer they wait to cut, the worse the damage will be from having misplaced interest rate policy. If we could just outsource the task of setting the FF target to the 2-year yield, we would have better
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We have never seen a drop in the money supply like we have now during the modern era of such accounting (older than 1959 is proxy data). We know that big surges in M2 bring big stock market surges a year later. We don't know what big drops like this mean.
@McClellanOsc I am far from a bull here, but wondering if you think the amount of excess money in the system from their 2020-2022 printing binge might actually make this time. different.
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Greenspan was right (on this particular point at least). Federal tax receipts lag the movements of the SP500 by about 1 year. Bear markets hurt future tax receipts. It is tough to find a better correlation than this one.
“A surprisingly large % of US income tax receipts are tied to a rise in US stock prices. When the US stock market just stops rising…not falls, but just stops rising, that will put pressure on the receipt side of the US fiscal picture.". -Greenspan, 2015. US stocks = the economy.
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The Fed Funds rate is now almost a full point above the 2-year yield, reflecting an immense amount of overly tight monetary policy from the Fed. They were slow to respond just like this in 2001 and 2007, and each time it caused big problems.
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The bulls have 2 big points arguing in their favor. The first is that we are seeing gobs of breadth, which is bullish. [1/x]
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Another good comparison is between the spot VIX Index and its futures contract prices. We are seeing a really high spread now, which is a sign of a top for prices.
VIX - funny that it is dubbed the "fear" index when it is essentially based on the underlying historic vol. Traders should look instead at the difference between the actually vol and the implied (vix).
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Heard on TV: "Every single regional and local bank across the country is now assessing their loan assets and liabilities. ". Isn't that what they are supposed to do, every day?.
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I do not profess to be a bitcoin expert in any sense. But I shared this interesting chart in my Daily Edition this evening. Total open interest in bitcoin futures has nearly doubled in the past 2 weeks. Something interesting is brewing.
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Note the current big divergence. Note also that important stock market tops in the past (except 2020 Covid Crash) all featured similar divergences.
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One can follow the Taylor Rule, which is mathematically complex with several inputs. Or one can just listen to the 2-year T-Note yield, which knows better than the Fed's 400 PhDs do about what the FOMC is going to do.
The Taylor rule uses a formula to calculate what it considers to be the optimal policy rate. How do different measures of the output gap affect the prescribed rate?
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In the entire published history of monetary aggregates (since 1959), there has never been an M2 drop as big as what we are experiencing. I still think that is going to matter, after the 12-month lag does its thing. See more at
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CBOE Put/Call Volume Ratio on Friday was highest since the Covid Crash.
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Perhaps the greatest case of front-running which did not work out well was gold in 1974. Back in 1975, Americans were finally allowed to own gold bullion again. President Roosevelt back in 1933 had made it illegal for Americans to own gold bullion, and everyone had to sell
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The FOMC will "maybe" pause additional rate hikes at the June meeting. They should instead convene an emergency Zoom meeting right now, today, and implement a 1 full point cut, then be ready for making more cuts. Every day's delay worsens the effects of this screw up.
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Stock price movements are looking more and more like 1973-74, especially lately (not so much back in 2021). But the fundamentals are totally different now; it's not like we have some oil embargo, and a president facing investigations over a coverup.
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I hear it argued that the inverted yield curve must not matter this time, because if it mattered then it should have mattered by now. This misunderstands the 15-month lag.
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The drop in the VIX Index on Friday took it well below its distant month futures, which actually rose, widening this spread.
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The SP500 kept going down Friday, but breadth was positive, helping to lift the NYSE's McClellan A-D Oscillator up further from Tuesday's very low reading. It was the most negative reading since March 2023 (which was a pretty good price bottom). Seasonality is still in the bulls'
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Jerome Powell stated in his interview Tuesday that the Fed is not done hiking rates. They should be, since they have already surpassed the 2-year T-Note yield. Bad things happen to the economy when the Fed does that, e.g. Internet bubble collapse, 2007-08 GFC.
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Latest M2 data just out, tiny uptick in M2 (not seasonally adjusted) in June. We have never seen a drop like this one in M2/GDP, so it is hard to say exactly what it means. We know that big rises in M2/GDP lead to big stock market gains 1 year later. But it is extrapolation not
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My latest Chart In Focus article, "A-D Line Divergence Shows Bull Market Starting To Crack", is posted at And you can sign up at that same link to receive these weekly articles straight to your inbox. No strings, no spam, and we don't sell our list.
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We could eliminate the debt ceiling, and deficits, with just one law change. Here's how it would work: On Sep. 30, if the total federal debt is even 1 penny higher than 1yr ago, then tax rate for that year goes to 90% for POTUS, VP, Congress, & cabinet, on all household income.
What's the point in even having a debt ceiling if Congress just keeps raising the limit?.
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When the McClellan Price Oscillator for the SP500 turned up on Mar. 3, I opined in my Daily Edition that it was likely to turn out to be a "fishhook" structure. A fishhook marks the failure of the forces of reversal, and opens the door to vigorous trend resumption.
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Traders celebrated Reagan's 1980 win in a big way, thinking that they were getting reforms they wanted. 1981, though, turned out to be an ugly year, and the ugliness lasted all the way to the great 1982 bottom before the post-election hopes and dreams were finally fulfilled. Read
My latest Chart In Focus article, "Post-Election Celebrations We Have Seen Before", is posted at It looks at how traders celebrated after the 1964 and 1980 elections, although what happened after the initial celebration was very different.
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Look at this chart of copper vs. $TNX, and ask yourself this question: When these two disagree, which one usually ends up being right?
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How did it escape the attention of all of Fintwit (as far as I know) that tomorrow, March 23, is "World Bear Day"?
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I served 11 years in US Army, and thankfully never qualified to be honored on Memorial Day. Enjoy your weekend. Think of those who did.
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Here is an interesting divergence. And I have not heard nor seen much discussion of EEM lately, which makes it all the more likely to be a relevant indication.
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I just heard an "expert" on TV saying that the inverted yield curve has been one of "a lot of false signals on recession". A large number of supposedly smart people just don't understand the 15-month lag involved, which is just now coming to fruition.
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The McClellan Oscillator is a very short term accelerometer for the A-D data. The companion Summation Index changes each day by the value of the Oscillator, so the Summation is moving down now, while prices move up, which is highly irregular and a sign of trouble.
By my count today, only 30 NDX component stocks were higher on June 13, despite the new all-time high for the index. That keeps the McClellan A-D Oscillator for those stocks below zero, not the condition you want to see if you are in the bullish camp.
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The 60-year cycle in interest rates is pointed higher until 2040.
Interesting behavioral study utilizing both price and time. My take? 1) Bonds have entered a secular bear market associated with structural inflation; 2) Bonds are due for a countertrend rally of cyclical proportion.
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We have been through 3 prior rounds of QE. Each time, it worked really well to lift stock market. And it worked horribly whenever the Fed decided to stop. Now "Not QE" has morphed into QE4. Do you really want to bet against a phenomenon with this track record working?
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Bearish divergence in the 14-3 stochastic oscillator for the DJIA.
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The Nasdaq's A-D Line should never be used for this purpose of noting bearish divergences, because it has always had a tremendous bearish bias. It has never, not once, made a new all-time high. It started downward from the beginning of the data in 1972 and has never made it back
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Investors Intelligence survey this week shows fewest bears since February 2018.
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Gold prices in Japanese yen do not agree with the lower low seen in the dollar price plot. When they disagree, it is usually the price of gold in yen that ends up being right about where both plots are headed.
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I'm hearing it said that FTX is the "Lehman Brothers" moment of 2022. If so, it is arriving just a little bit early on the script. Lehman collapsed Sep. 12-15, 2008, and we are still at the equivalent of the beginning of August 2008 in the best analog.
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I still like this cartoon, applicable once again today.
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The NYSE's McClellan Volume Oscillator is now officially "pretty darned oversold", just as is the A-D version. You can see the McClellan A-D Oscillator every day at
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Fundamentalists are worried about the SP500 at 21x earnings. But that is not the relevant price ratio. This is:
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It's not the Fed, as they are continuing to withdraw liquidity from the banking system.
Interestingly, whatever is fueling this rally (increasing earnings, skeptical sentiment, momentum, etc.), it’s not the anticipation of a better economy. The @sentimentrader Macro Index Model has fallen back down to 0.364. Make of it what you will.
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The bond market has known this for 13 months.
Sorry to be Captain Obvious here, but the economic/market takeaway from all of this is that the labor market has been softer than many assumed which reinforces the view that the Fed should be cutting rates.
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The big money "commercial" traders tracked by the CFTC in the COT Report are now at their smallest net short position as a group since 2016. These traders are largely oil producers using the futures market to lock in pricing on their future production. This action is their way
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American Trader: "Gold is in a downtrend since May.". Japanese Trader: "What do you mean? Gold is still in an uptrend for the past several years.". Both of them are correct. The interesting point is that when the two plots disagree, the yen-priced plot is usually correct.
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On Dec. 26, Nasdaq total volume was over 2x that of NYSE, part of an ongoing trend. This chart shows a 10MA of the daily NQ/NY TVOL ratio. High readings like this pretty reliably mark price tops, with one notable exception back in April 2023.
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The late Mike Epstein was a former NYSE floor trader, and pres. of the Market Technicians Assoc. The following was told as a eulogy in 2009.
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I’m fortunate that my father Sherman McClellan is still around and doing great, still working with me every day. Behind us in the background is Mt. Rainier, who was camera shy that day.
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I have no idea what secret sauce is in the "Core Risk Model", but I can say that this is an elegant chart. The pinnacle of chartology is to build a chart that does not even need any elaboration by text. Pretty much anyone can look at this chart, and see what it is saying.
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I don't normally work on currencies data, but something in Friday's COT Report caught my eye. The big-money "commercial" traders of British pound futures made a big move this week to the short side, as if someone knows something is coming. What that is, I don't know. But when
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On Monday, Feb. 8, the Nasdaq saw 706 stocks make new 52-week highs. That is an all-time record, and not bearish.
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I talk a lot about the difference between a "condition" and a "signal". The NYSE McClellan A-D Oscillator has been in a bearish divergence (condition), and now it broke down through zero (signal) on Thursday's big intraday breadth reversal.
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Friday, Oct. 11 saw the lowest equity Put/Call Volume Ratio since July 2023.
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PSA: As December gets closer, you are going to hear the term "Santa Claus Rally" get tossed around by analysts, seemingly referring vaguely to any rally that happens sometime around Decemberish. Among professionals, the term "The Santa Claus Rally" has a very narrow and specific.
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I continue to be amazed at how perfect this relationship used to be before Covid, and how absolutely broken it is now.
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