Wednesday, August 31, 2011

Overbought On Light Volume

The McClellan Oscillator has reached an extreme level and the market is vulnerable for a pullback after this rally on light volume.  However, the first day of September is typically a strong day, so any pullback may begin Friday or next week.  If the market manages to consolidate in a sideways pattern, then expect much higher prices.

When the M.O. reaches this extreme, it usually means that at least a retest of the high will be seen after a pullback if not higher prices.  It may be prudent to lighten up on short term longs tomorrow or Friday, but it may be too early to think about shorting.

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