Market Signals Strength Long-Term: Weekly Nifty 9

Research Report Excerpts #5

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The McClellan Summation Index is a long-term version of the McClellan Oscillator, which is a market breadth indicator based on stock advances and declines. Sherman and Marian McClellan created and developed the McClellan Summation Index. Interpretation is similar to that of the McClellan Oscillator, except that it is more suited to intermediate to major trends and related reversals. Some McClellan Summation Index rules of thumb include the following:

  • Look for major bottoms below -1,300
  • Look for major tops with a divergence above +1,600
  • The beginning of large bull runs are sometimes indicated when the McClellan Summation Index crosses above +1,900 after moving +3,600 points from its prior low (e.g., the McClellan Summation Index moves from -1,550 to +1,950.

The NYSI breaking out and above the trend line is a strong, positive long-term development in my opinion. Furthermore, recognize that this is a BREADTH INDICATOR! What do we know about breadth? Breadth leads price! 

Research Report Excerpts #6

In somewhat of a surprise, the Markit Service PMI reading rose more sharply than expected, even with regional economic restrictions continuing to roll-out across the country since November. The seasonally adjusted final IHS Markit U.S. Services PMI Business Activity Index registered 58.4 in November, up from 56.9 in October. The latest reading was higher than the earlier “flash” estimate (57.7) and signaled the sharpest expansion for over five-and-a-half years. Growth of business activity was often linked to greater new order inflows and the release of pent-up demand, as clients became less hesitant to make purchases.

The U.S. ISM Manufacturing index dropped a bit to 57.5 from a lofty two-year high of 59.3 in October, but a lower 55.4 in September still leaves the index fluctuating around its highest levels since August of 2018. The index has been deep in the expansion territory since June.

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