Tom McClellan – McClellan Market Report

Back in May 2011, I introduced Chart In Focus readers to the leading indication that I get from looking at Commitment of Traders (COT) data on eurodollar futures.  Since then (and also before) readers of our twice monthly McClellan Market Report newsletter and Daily Edition have appreciated getting to see this relationship on a more frequent basis.

For almost a year, we have known that a top was due to arrive in February 2012.  And sure enough, stock prices have been rising nicely in recent weeks as fulfillment of that expectation.

Now this leading indication says that things are going to get less fun for investors for a while.  The next 3 months show a sideways to downward structure in the eurodollar COT data, and the implication is that the steep price advance that we have been seeing should transition to a more sideways market.  That’s great if one can be a swing trader, buying oversold opportunities and selling when prices get overbought, and then repeating.  But it is a lousy time to be a buy and hold investor.  How to play that chop is something that we will be sharing with our subscribers.

Eurodollar COT Leading Indication

The next major inflection point is due in early June, when this leading indication says that a big multi-month rally is due to begin.  By then, all of the bullishness that investors are expressing now in the various sentiment indications should have turned to frustration and pessimism, creating the right setup for a big new uptrend.  The hard task will be to remain patient until then, waiting for conditions to be right again.

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McClellan Financial

The McClellan Market Report and its companion Daily Edition are produced by Sherman McClellan and Tom McClellan. Both are technical analysts and educators whose innovative insights have helped countless investors succeed. The McClellans' work has been repeatedly quoted in Barron's, and their market timing signals have ranked them in the top ten timers for both intermediate and long term by Timer Digest.

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  1. Looks like trader heaven is predicted to continue. I’ve enjoyed it on a small scale, but with a preservation of capital strategy, its been mostly pain. As I try to keep feet on the ground and stay in touch with people who work for multi-nationals, I’m not getting the “hiring is up” story. More like “major austerity” to manage the bottom line. If we follow the money, the positive hiring trend must be coming from companies that thrive on stimulus, and have a predominately domestic customer base. If that is the case, the question becomes, can we decouple from the global economy, continue the stimulus, and thrive? Sounds more like trader heaven.

  2. only if the world was very predictable. my experience is that such predictions last for only one time

  3. I actually remember this chart from an article published here on May 29, 2011. This is the first time I started to pay attention to COT eurodollars. The indicator predicted a market top in June and a subsequent meltdown and this actually happened. I don’t know how reliable over time the predictions are but I would not just dismiss this indicator that easily. This is the link to the archived article from May 29

  4. And leave it up to Greece to start the latest round of Eurozone’s Foot-shooting Drama.. In early February..

  5. I haven’t been able to justify as such, but this is exactly what I’ve been expecting as well.

  6. Golly gee golly!!!

    ‘Tis so simple, a blind man can see it with a cane.

    Makes one wonder, since its all so simple, just why everybody isn’t as “rich as Romney.”

    Makes one wanna shout, “wheeee, this investment stuff is easy.”

    Oh, I forgot. The “wheeee thing” is actually about gold.

  7. I don’t know. I see a lot of choppiness between the summer of 2009 and 01/05/2010 but the s&p rallied nevertheless 400 points. Wouldn’t bet to much on this indicator. I think we will continue this rally during whole spring and summer so I would be careful exiting the market to trade this area of coming chopiness. Wouldn’t be surprised at all to see the s&p well over 1500 by june.

  8. If one looks to the rest of e/d futures data points not pictured here, it all looks like a gigantic megaphone pattern forming up which will get us back at SPX 1100-1150. Let’s see what happens.