Pull the trigger with confidence.

The relationship between Bitcoin and the stock market is an extremely curious one.  Stock prices are supposedly backed by the future earnings capacity of the company.  Bitcoin’s value is not really backed by anything.  Its value is whatever somebody thinks the value is.  And yet the price of Bitcoin and the level of the SP500 do indeed have a relationship. 

The frustrating thing is that it is assuredly an imperfect relationship.  And it has been a changing relationship over time.  Back in... Read More

Liquidity is bullish for the stock market.  It is even more bullish for small cap stocks and other types of issues which are more sensitive to liquidity.  That is why indicators like the A-D Line are so useful for gauging the health of the liquidity pool.  There are more small cap stocks than large ones, and so they have a bigger voice in the A-D Line.  When the A-D Line and small cap stocks are doing well, the overall market tends to be very healthy, because liquidity is plentiful.

The Fed... Read More

A year ago, I wrote here about how the nature of structures in the McClellan A-D Oscillator carries important information about what lies ahead.  A “complex” structure is one that features chopping up and down without a crossing of the zero line.  Such a complex structure implies strength for the side of zero on which it forms, either bullish strength or bearish strength.

A “simple” structure, by contrast, involves no chopping up and down on one side of zero, just a move across the zero... Read More

This article originally appeared in the Jan. 6, 2021 issue of The McClellan Market Report.

Watching the money supply numbers used to be a favorite activity of traders and investors back in the late 1960s and nearly 1970s, and below I will show you why.  But stock investors are not as enamored of those data any more.  Maybe they should be again.

I have worked for years to understand this relationship, and have learned a few things in the process.  One point I have learned is that the raw... Read More

I am always on the search for signs of liquidity problems, and Advance-Decline (A-D) Lines are among the best voices to tell us about such problems.  It takes a lot of money being thrown at the stock market to lift the majority of stocks.  So when the majority of stocks are moving higher, the natural inference is that there is a lot of money behind the move.

One of the big criticisms of the NYSE A-D data is that it is supposedly contaminated by a lot of issues that are not “real stocks”. ... Read More

The Jan. 27 VIX pop was fueled by worries over Reddit-inspired traders making a raid upon the established order, which threatened the sanctity of the Wall Street machine and the hedge funds which are part of that machine.  Traders feared for the loss of their comfortable and normal situation, and so they bid up the VIX (through the pricing of SP500 options) to a huge number in just a very short time frame.

That single episode by itself is not all that surprising.  The amazing part is how it... Read More

For years I have been tracking the investor sentiment data series known as the NAAIM Exposure Index.  It is compiled by the National Association of Active Investment Managers (NAAIM), which surveys its members weekly concerning their firms’ overall equity exposure as of each Wednesday.  Responses can vary widely, as indicated below:

Range of Responses:

200% Leveraged Short
100% Fully Short
0% (100% Cash or Hedged to Market Neutral)
100% Fully Invested
200% Leveraged Long

The... Read More