Where are the oscillators now?

We've been spending most of this year "wishing" for a correction.  It's never any different when we wish for a correction.  It usually does occur, but as much as we recognize that it was needed, we never enjoy it.  So again, just like when it is so hard to turn bullish when the news is terrible, we have to go to our Asset Allocation Model and our short-term oscillators to get the real message.

After yesterday's market action, let's look at the NASDAQ McClellan and 21-Day Oscillator.

This is very good.  You can see in the chart above that the McClellan Oscillator is now below -100, and the 21-Day Oscillator is now under the -50 line.  In the severe corrections of the last few years, the 21-Day Oscillator usually declines further, but most regular corrections stop when in this position.  So, we now have to change this former negative input to a positive input.

Maybe even more impressive, our Overbought/Oversold Oscillator that compares the deviation of the short-term advance/decline line with it's longer-term counterpart, has been driven from its prior overbought zone into the oversold area.  That's also good.

Okay, so that is one feather in the Buy Camp!  We've also seen "some" improvement in the Psychology Composite, but it hasn't really had enough time yet to absorb the current "healthy" fear.  So for now, the improvement is still relatively minor.

But overall, we believe this bull market is very much alive and well, and this correction is just what the doctor ordered to keep this young bull's life healthy and ready to romp again in the weeks ahead.

To read today's complete Market Comment, click here.

Don Hays

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