In the actions of the last few days, the stock market very obviously got very oversold. And as the McClellan and 21-Day Oscillators hit those magic levels, we suggested that this almost always leads to a rally. We've now had the rally, and it may still be in progress.
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In the chart above, you can see that almost always—unless you happen to be in one of those last stages of a bear market decline—when the McClellan Oscillator drops under -100 and the 21-Day Oscillator confirms that drop with a decline under -50, you get an ensuing rally in the stock market. This indicator does not tell you a lot about the long-term, but it certainly measures when the market's short-term propeller has been would tight and needs a reflex rally to neutralize the strain. Furthermore, if you look at the chart really close, you can see that in "most" cases, except those extreme market panic sell-offs, the rally hangs in there until the 21-Day Oscillator moves back up to neutral.
Of course, in stock market analysis, nothing is ALWAYS, but that normal reaction seems to imply that this rally could "hang in there" for a few more days at least.
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