When we spoke to well-known market timer Tom McClellan in June of last year, he told listeners that the market was in the final stages of a topping process, that he personally was planning to be completely out of stocks by August, and that he expected “a big decline into early 2016.” Looking back, McClellan has clearly earned his reputation as an accurate “market timer” given the large August decline, weak Santa Cause rally, and worst January on record for stocks.
So that was then—what about now?
The S&P 500 has rallied strongly from its lows earlier this year at 1810.10 closing Friday just shy of the 2000 mark at 1999.99. Where does McClellan think the market is heading from here?
“I think that we are still seeing the rally out of January and February lows as a bear market rally... it's brought a lot of hope back into investors' hearts and that's usually a sign that it's time to turn around and go the other way,” he tells listeners in Saturday’s Technician podcast.
Looking into the rest of the year, McClellan thinks March will be ugly, followed by another rally and final low in October.
One thing that worries him currently is the extremely high reading given by his widely-followed McClellan Oscillator.
He interprets it with the following:
“We’ve seen very strong breadth numbers pushing the McClellan Oscillator up to above 300 and that's a really, really high number, which if you were to see that in a bull market that would be a promise that there was much more upside ahead. When you have a very high reading like that occur during a bear market like we're in now it's a sign that you've blown off all the available bullish energy during the countertrend rally and that it's time to head lower. We saw a lot of instances of that during the 2008 bear market—you get a very high positive McClellan Oscillator as everybody gets excited again and then you get another down-leg, and I think we are going to see another [one].”
Listen to this full interview with Tom McClellan airing Saturday by clicking here. For a complete archive of our broadcasts and podcast interviews on finance, economics, and the market, visit our Newshour page here or iTunes page here. Subscribe to our weekly premium podcast by clicking here.
