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McClellan Sounds "Alarm" Over Stock Market Drawdowns

Tyler Durden's picture


Via Tom McClellan via NTMarkets,

Alarming Sign in NDX Stocks’ Drawdown


Chart In Focus

July 03, 2014

The Nasdaq 100 Index is making new multi-year highs, levels not seen since the weeks just after the 2000 Internet Bubble top.  But it is interesting for us to see that the average component stock in that index is down 7% from its trailing 52-week high. 

And that 7% drawdown number is actually smaller than it has been recently, but it is still not back to the low drawdown reading of 6.0% that we saw in early March, before the Nasdaq 100 stocks got into a patch of trouble.  And the fascinating point is that divergences like this tend to be really important for the long-run picture for stock prices.

This current divergence is not guaranteed to stay with us.  It looks like a genuine divergence now, but it is still possible that we could see a continued rally that takes the stocks in the Nasdaq 100 collectively up closer to the level of their 52-week closing highs, thereby closing the gap on this measure of average drawdown.  But for now, the message is that the average stock making up the Nasdaq 100 Index is not confirming the bullish message of the NDX’s higher price highs. 

A similar message comes from a similar indicator, this time examining the 30 stocks which make up the DJIA. 

DJI Oscillator Positive Index

This one looks at the 30 stocks that make up the DJIA, and checks each one to see if its Price Oscillator is above or below zero.  What we are seeing lately is a declining number of Dow components participating in the uptrend that way, and a drop of this indicator below its 15-day moving average.  This condition also comes as a divergence appears between prices and the indicator.

As with the NDX stocks’ indicator above, the divergence does not absolutely have to persist; the market could just power through it, but that is not usually the way things usually work out.


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Sat, 07/05/2014 - 19:50 | 4927616 kliguy38
kliguy38's picture

This is truly shocking....what will we do???? This implies that things may be MANIPULATED???  HUH??? I'm shocked.. truly SHOCKED.....hehehehhe

Sat, 07/05/2014 - 19:52 | 4927620 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Isn't that what red-in-tooth-and-claw style capitalism is all about? That it's only a crime when you get caught (and can't buy out the judges)?

Sat, 07/05/2014 - 20:08 | 4927655 knukles
knukles's picture

Round up the usual suspects, all the bankers and funds close to the FED!


PS  I thought that it was only in "Jersey nothing's illegal until you're caught"

Sat, 07/05/2014 - 20:10 | 4927657 flacon
flacon's picture

Why is an INDEX of stocks not reflective of the stocks making up that INDEX? What is an INDEX anyway if it doesn't reflect the average price of the stocks?

Sat, 07/05/2014 - 20:14 | 4927668 buzzsaw99
buzzsaw99's picture

all stocks are equal but some stocks are moar equal than others. [/animal farm]

Sat, 07/05/2014 - 20:17 | 4927682 max2205
max2205's picture

Buy the fucking dip dumb asses

Sat, 07/05/2014 - 20:28 | 4927705 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

No, buy the fucking all time high, dumb asses (is what you should say). 

Sun, 07/06/2014 - 00:35 | 4928051 Oldwood
Oldwood's picture

I love this from FOx Business;



Now all you gamblers are COURAGEOUS!

Sun, 07/06/2014 - 00:57 | 4928285 Miffed Microbio...
Miffed Microbiologist's picture

Well it's hard for me to ascertain if one is courageous jumping into a lava spewing volcano or just plain stupid. Or may be it's something else.

I went to eat at the local casino the other day and we walked through a sea of people pushing buttons on blinking machines endlessly. Over and over again the machines took their money and they kept putting more in with blank looks on their faces. The machines were bleeding them dry but not one of the hundreds of people looked up and said " dear god, what the fuck am I doing? I am allowing a machine to take my money! I'm being robbed!" It is as if all their humanity has been washed away and they have reverted to the lowest form of existence. Hoping some day for the unlikely chance it will pay off. Funny, if it did, they'd probably end up putting it all back in the machine. Wall Street and casinos have morphed into one.


Sun, 07/06/2014 - 10:44 | 4928852 Freddie
Freddie's picture

Reminds me of the (HG Wells based) Time Machine movie with Aussie Rod Taylor.  The Moorlocks are the casino owners, NWO, govt unionzed employees including the Calif Highway Patrol.  The public are the Eloy aka sheep.


Sun, 07/06/2014 - 13:19 | 4929190 moneybots
moneybots's picture

"A story of recovery, perserverance"


A story of massive financial fraud.  Wait until the truth comes out.

Sat, 07/05/2014 - 20:15 | 4927672 TeethVillage88s
TeethVillage88s's picture

So, Sovereign Immunity for the Presidents of Regional Federal Reserves, and for all Treasury Personnel and Financial Adviser for the President???

Pretty sure you are not for offering Sovereign Immunity are you.

Sat, 07/05/2014 - 19:57 | 4927626 buzzsaw99
buzzsaw99's picture

manipulators jacking the market on the cheap.

ot - found this link on drudge: http://www.zerohedge.com/news/2014-07-02/brics-are-morphing-anti-dollar-...

don't know how often zh articles get on there but should be good for traffic.

Sat, 07/05/2014 - 20:33 | 4927709 lemosbrasil
lemosbrasil's picture

"Volatility smiles to Dow Jones, DAX, FTSE, CAC and MIB-Italy".....There are many, many whispers around Europe and USA that Volatility is not a elf ! Yes....Just see the uptrendline of Dow Jones from last 6 years.....see the diveergence volume.....see  round numbers like 17.000 to Dow Jones and 10.000 to DAX-Germany......see the uptrend line of RSI (Relative Strenght Index) of Dow Jones, absolutely respected in 2007 and broked....now....the same uptrendlne of RSI respected from 2009 until now......soon, it will broke.......

All these messages are here: http://pracompraroupravender.blogspot.com.br/2014/07/a-volatilidade-sorr...



Sat, 07/05/2014 - 20:50 | 4927752 Quinvarius
Quinvarius's picture

So only the most visible stocks, that are part of the most visible inducies, are rising?  Shocker.  I wonder what it would look like if it were all just a paint job?

Sat, 07/05/2014 - 22:14 | 4927835 tc06rtw
tc06rtw's picture

... Pay no attention to that man behind the curtain —



               Your Government  loves  you
               and wants you to be  RICH !!



Sat, 07/05/2014 - 21:50 | 4927922 gann1212
gann1212's picture

yeah he thought it was going to crash too. do your own homework no one is a guru ha ha

Sat, 07/05/2014 - 22:19 | 4927998 potato
potato's picture

An Oscillator? Seriously?

THis is bullshit.

Sat, 07/05/2014 - 23:27 | 4928124 I Write Code
I Write Code's picture

Hey, this is by the son of McClellan Oscillator!?


That's still my favorite technical summary.

But what's he yammering about, all he's seeing is what the Fed has been doing in manipulating individual equities and the market.  From that perspective there is no particular sign that things are topping out - I'm not sure what such a sign would look like, other than Janet Yellen riding a flaming unicorn across the sky.

The oscillator and summation index are doing stuff they shouldn't do and haven't done since 2008, but they follow the market manipulations, they don't prevent them, they show the manipulation, and if they retain any validity, it seems to be further upwards momentum.

Moar MoMo, Let's Go, BTFATH!

Sun, 07/06/2014 - 07:21 | 4928559 AdvancingTime
AdvancingTime's picture

The term "the new normal" has not been used much as of late, but going forward it may be about to return. Many investors and the public at large may be about to realize that central banks can only do so much through printing money and lowering interest rates. Both these actions carry with them some very strong and nasty side effects.

Markets have become very distorted as money has flowed into risky assets in search of higher yields. It could be we are about to see the markets morph into a "realizing market", one that grinds slowly downward. Another possibility is that at some point the wisdom of buying every pullback changes and the market simply drops like a stone. More on what the future might hold in the article below.


Sun, 07/06/2014 - 10:11 | 4928774 d edwards
d edwards's picture

IMHO, the "new ABnormal" is more fitting, cuz there ain't nothin' normal about the manipulated markets.

Sun, 07/06/2014 - 08:15 | 4928607 Chuck Knoblauch
Chuck Knoblauch's picture

The Federal Reserve is playing with itself.

They are buying and selling these inflated stocks.

I don't think they fooled any foreign investors to participate in the farce.

Sun, 07/06/2014 - 08:47 | 4928657 cassotto
cassotto's picture

indicators? when was the last time they worked?

Sun, 07/06/2014 - 10:19 | 4928790 Sandy15
Sandy15's picture

Not since Obummer took office.........


It's been a no brainer that the Fed is trading the futures market with itself.  They have Maiden Lane I, II, III which they are trading daily with.  Who cares if they lose in one, they're gaining in the other...... they can add zero's to the account getting to low.  Someone is buying calls and puts so far out of the money it's ridiculous!!!!

Sun, 07/06/2014 - 09:24 | 4928692 Lanka
Lanka's picture

Oscillate THIS!

Sun, 07/06/2014 - 12:58 | 4929140 Comte d'herblay
Comte d'herblay's picture

One thing about an 'average' is there is usually no one "in it".

If I make 100,000 and 4 each making 400,000, you get 5 making $1,700,000 for an 'Average' of-  5/1,700,000= $340,000.

None of the participants are earning $340,000.

Averages are like other statistics, mostly lies blessed with a pedigree.

Sun, 07/06/2014 - 13:14 | 4929178 moneybots
moneybots's picture

"The Nasdaq 100 Index is"


a lovely parabolic.

Mon, 07/07/2014 - 20:29 | 4933777 MeelionDollerBogus
MeelionDollerBogus's picture

Unless you actually know what that means in math in which case, no it isn't.

Sun, 07/06/2014 - 17:37 | 4929773 Carpenter1
Carpenter1's picture

Does anyone believe this will continue for 25 years? No? Then all we're discussing is when. Kinda puts things in perspective, especially for those who mistakenly believe the FED can continue this indefinitely. 



Mon, 07/07/2014 - 20:23 | 4933748 MeelionDollerBogus
MeelionDollerBogus's picture

Grr. I can't get data easily for this. This is precisely where a good scatterplot would be valuable.

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