Five Below, Inc. (FIVE) has had a rough year, to say the least. The stock is trading near its 52-week lows and 65% below its 52-week highs. The company’s CEO resigned last July and, since then, shares have struggled to rebound.

The discount retailer that caters to low-income shoppers rallied 10% after last quarter’s results and quickly gave back all those gains. It’s hoping to follow in the footsteps of its peer, Dollar General (DG), which guided higher than expectations and rallied last week.

Technically, shares are in a long-term downtrend that has accelerated headed into this week’s numbers. Every rally has been an opportunity to sell, as shares have consistently trended below its downward-sloping 200-day simple moving average (SMA).

Shares are oversold based on their relative strength index (RSI), but the stock has remained oversold for weeks. It appears closer to a tradable near-term bottom, where there is support for a bigger sell-off to around $65.

As a result of this, risk/reward favors the bulls. Look for shares to rally back into the downtrend channel on a near-term rally. That would take shares into the $78 to $85 area. Sadly, each rally has been a great opportunity to sell. There is much resistance to get through any upswing to signal that this is a good long-term buy, but, for the swing trader, a rally may be in order.

Nike, Inc. (NKE) shares have been mired in a two-year slump. Shares have fallen after the last five quarterly reports with an average loss of -9%. They have traded lower after seven of the last 8 releases. Shareholders are hoping that the second full quarter under CEO Elliot Hill’s leadership will start the much-needed turnaround for investors.

The sneaker giant expects slower sales and a decline in numbers thanks to markdowns to clear out unpopular inventory. However, hope springs eternal. Have new shoe models grown in popularity? Has Mr. Hill started to stem the tide of weaker growth? We shall find out when they report after the close on Thursday.

Technically, since breaking below the 200-day moving average in December 2023, shares have consistently stayed below this key moving average. There was hope that a recent announcement with Kim Kardashian’s Skims could lead to the breakout. It did lift for a couple of days, but couldn’t sustain upward momentum, so the bears won out again. 

There is a small silver lining in the chart above, though. When shares hit a recent low, the RSI reading had a bullish divergence. This means price made a new low, but the momentum indicator made a higher low. This could be a change demonstrating that the worst may be over.

To the upside, expect a test with that pesky 200-day moving average again. Look for a break above there and a run to recent highs at $82.62. If it fails at that level, you want to see old resistance in the 200-day act as support. Then the bulls may be able to take control. To the downside, you do not want to see any new lows, Look for support at the $68 to $70 level. The risk/reward set-up favors the bulls taking a shot here and keeping sell stops nearby if it fails. 

Micron Technology, Inc. (MU) has experienced some rather large moves after reporting earnings over the last four quarters. Last Q, it dropped -16.2%; before that, it gained +14.7%, lost -7.1%, and rallied +14.1%. So it’s not surprising to see that a move of +/-10.4% is expected when it reports after the close on Thursday.

Investors will focus on a few fundamental stories. Projected gross margins might decline according to their guidance. That could be a headwind. Data center revenue has been a strength; let’s see if it continues. Then, of course, there’s the all-important guidance—will they mention demand metrics and address potential tariff concerns?

Technically, shares continue to be mired in a neutral, yet very tradable, range. Going back to its August lows, shares have found a solid level of support around $85. Shares have tested that level multiple times and held. On the first three occasions, shares rallied back to $110. Recently, they have struggled to get that high, and the downward sloping 200-day now acts as resistance.

If shares were to gap higher, watch two strong levels of resistance. The first is the 200-day at $105.20, while the second, and most important, is just above $110 to $114. It may take a miraculous guide to break and stay above these key resistance levels.

As to the downside, we have seen $85 stand the test of time again and again. The more often it is tested, the more likely it is to fail. So there are clear lines in the sand of this rectangular formation. The measured move from this pattern is for a move of +/- $25. That would give upside and downside targets of $135 and $60, respectively. Clearly, it’s a coin flip at the moment from a risk/reward perspective. We will need more information to see how this resolves. For now, keep trading the channel.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Even with an impressive run of relative performance thus far in 2025, some investors still remain skeptical of its uptrend.  Let’s look at the performance of gold through three different angles, all using the best practices of technical analysis.

Gold Has Dramatically Outperformed in 2025

Whether you think gold has merit as a store of value, as a safe haven, or for no reason at all, there is no denying that gold has registered much stronger returns than stocks so far in 2025.

The S&P 500 index is now down about 4.0% for the year, even with Friday’s strong finish to the week.  The Roundhill Big Tech ETF (MAGS) is down 12.4%, while the growth-heavy Nasdaq 100 is down about 6.2%.  The SPDR Gold Shares (GLD), meanwhile, is up another 13.7% in 2025 after an exceptionally strong 2024.

There have been a number of times over my career where people have pushed back when gold is doing well.  They have claimed that it’s just an anomaly, or that it shouldn’t go higher because of some particular reason.  My answer is always to bring up the chart and remind us both, “The market doesn’t care what we think!”

Gold Prices Remain in a Primary Uptrend

Let’s break down gold’s outperformance in greater detail using a daily chart of the GLD.  At a time when many stocks and ETFs have broken below moving average support, gold stands out as remaining above two upward-sloping moving averages.

GLD has featured two clear consolidation phases since the end of 2023, one from April to July of 2024, and the other from October through December 2024.  In both cases, the ETF bounced off price support a number of times before eventually resolving these patterns to the upside.  Consolidations are very common in long-term bullish phases.  What’s important is that the uptrend continues after the price exits the range, as we’ve often seen recently with GLD.

We can also apply our proprietary Market Trend Model to gold prices, which can help us to better compare the trend in gold to other ETFs and indexes.  We can see that the GLD is currently bullish on all three time frames, compared to the S&P 500 which is now bearish on the short-term and medium-term time frames.  When stocks are in a confirmed downtrend, I prefer to look for things that remain in primary uptrends, and gold fits the bill.

Gold Stocks Are Catching Up to Physical Gold

I’m often asked whether it’s better to play gold using an ETF that holds physical gold versus one that offers exposure to gold stocks.  By focusing on the relative performance of gold stocks compared to gold futures, we can perhaps identify where opportunities could lie going forward.

Here we’re showing the VanEck Vectors Gold Miners ETF (GDX) along with RSI and then the relative performance of GDX vs. GLD.  When that ratio is sloping higher, gold stocks are outperforming physical gold.  Going into the end of last year, the GLD was outperforming as gold stocks experienced a significant pullback.  But so far in 2025, we’ve noticed a strong reversal in relative performance which shows gold stocks are performing better.  

The GDX is now testing its October 2024 high around $43.50, and we would consider a confirmed break above this level as an additional sign that gold stocks could continue a “catch up trade” versus physical gold.  And with so many gold stocks starting to appear in the top decile of the StockCharts Technical Rating (SCTR), we see this as an area of emerging strength in the weeks to come.

Looking for our daily market recap show?  CHART THIS with David Keller, CMT runs every trading day at 5pm ET over on our YouTube channel!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

Disclosures: Author holds position in GLD.

Is a new market uptrend on the horizon? In this video, Mary Ellen breaks down the latest stock market outlook, revealing key signals that could confirm a trend reversal. She dives into sector rotation, explains why defensive stocks are losing ground, and shares actionable short-term trading strategies for oversold stocks. Don’t miss these crucial market insights to spot the next rally before it takes off!

This video originally premiered March 14, 2025. You can watch it on our dedicated page for Mary Ellen’s videos.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

It’s been rocky for the SP500 and particularly rocky for some industry groups and sectors. The market does appear ready to give us a good bounce, but past that we aren’t overly bullish.

Tariff talk has really pummeled the Retail (XRT) industry group and we don’t see much relief in sight. The daily chart below doesn’t even show the next level of support. Friday saw a good bounce but it wasn’t enough to really improve the under the hood indicators.

Participation is anemic with all readings below our bullish 50% threshold. It will be very difficult to turn this decline around when so few stocks have price above their key moving averages. The Silver Cross Index is at a very low 16% and the Golden Cross Index is below our bullish 50% threshold. Both the Silver and Golden Cross Indexes are below their signal lines and falling so the IT and LT Bias is BEARISH. The PMO is at an extremely low reading below the zero line. We don’t see much upside available to XRT. Even if we do get a bounce, overhead resistance is very near at 69.

The weekly chart shows a bearish rising wedge that executed as expected with a drop below the rising bottoms trendline. The weekly PMO is accelerating lower. It has landed on a strong support level, but given that weekly PMO we have to wonder if this level will hold.

Conclusion: Tariff talk is taking its toll on the Retail industry group and a trade war isn’t out of the question. This will continue to put downside pressure on this group. Key support has been reached on the weekly chart, but given indicators on both the daily and weekly charts, it doesn’t look that sturdy.

The DP Alert: Your First Stop to a Great Trade!

Before you trade any stock or ETF, you need to know the trend and condition of the market. The DP Alert gives you all you need to know with an executive summary of the market’s current trend and condition. It not only covers the market! We look at Bitcoin, Yields, Bonds, Gold, the Dollar, Gold Miners and Crude Oil! Only $50/month! Or, use our free trial to try it out for two weeks using coupon code: DPTRIAL2. Click HERE to subscribe NOW!

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2025 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

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Price Momentum Oscillator (PMO)

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Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

The weight of the evidence shifted to the bears over the last few weeks. First, the major index ETFs reversed their long-term uptrends with Bollinger Band signals, our breadth models turned net negative and yield spreads widened. This report will focus on the breakdown in the S&P 500 SPDR (SPY), which represents the single most important benchmark for US stocks.

The SPY chart below shows weekly candlesticks and the 40-week SMA, equivalent to the 200-day SMA. On the top right, we can see a break below support from the January low and a break below the 40-week SMA with an outsized decline. An outsized decline is an exceptionally sharp and deep decline that can derail an uptrend. As of Thursday’s close, SPY had fallen over 9% in 15 trading days, the largest 15 day decline since September 2022. This exceptionally strong selling pressure pushed prices below the demand line (support) and a key long-term moving average. Note that a similar break occurred in January 2022, which we covered in a report and video on Friday.

Large-caps are also starting to lag the broader market. The middle window shows the SPY/RSP ratio breaking below its 40-week SMA for the first time since early March 2023. After outperforming for two years, large-caps (SPY) are underperforming the average stock in the S&P 500 (RSP). SPY also started underperforming RSP in January 2022, which is when the 2022 bear market started. 

So now what? SPY became short-term oversold this week and ripe for a bounce. The broken support zone and underside of the 40-week SMA turn into the first resistance levels to watch (blue shading). We are now trading under a bear market regime so I would expect any bounce to fail in the 580 area.

Our reports and videos covered the following this week:

• Six of the nine breadth-model indicators triggered bearish signals.
• Yield spreads widened as stress increased in the credit markets.
• Six major index ETFs triggered bearish Bollinger Band breaks.
• Precious and industrial metals ETFs extended on breakouts.
• Applying lessons from the 2022 bear market to the current situation.

Click here to take a trial and gain immediate access!

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In this exclusive StockCharts video, Julius analyzes US sector rotation using Relative Rotation Graphs (RRG), starting with the 11 S&P sectors and breaking them into Offensive, Defensive, and Sensitive sectors to uncover unusual market rotations. He then dives into the Financials sector, identifying top stocks with potential for outperformance — even as the sector remains one of the strongest on a relative basis.

This video was originally published on March 14, 2025. Click on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

No one can predict how tariffs will play out or how severe their effects will be on everything from consumer goods to the broader economy. But investors have gotten a taste of the market chaos such uncertainties can bring.

Investor fatigue is setting in, brought on by the gnawing sense of indecision due to extreme market unpredictability. The question on investors’ minds now is, “Which stocks can withstand—or even thrive in—this erratic environment?”

Three stocks you might consider are Sprouts Farmers Market Inc (SFM), Clorox Co (CLX), and Duke Energy Corp (DUK). Here’s why:

• SFM. With a strong focus on local sourcing, Sprouts is less exposed to rising import costs, giving it a potential edge over competitors. As tariffs drive up prices on imported goods, consumers may shift toward domestically-grown produce, benefiting Sprouts’ sales and margins.
• CLX. Clorox is well-positioned to weather economic uncertainty due to its strong pricing power, allowing it to maintain profitability by passing costs onto consumers—an advantage the company has been able to maintain throughout its long history.
• DUK. Duke Energy has garnered the attention of many analysts recently. With steady cash flow, a strong dividend history, and recent analyst upgrades, it’s a stock to consider.

While these fundamental factors make them compelling investment candidates, let’s examine their technical positioning, starting with a daily chart of SFM, using the ZigZag line to emphasize the swing highs and lows that define the trend.

FIGURE 1. DAILY CHART OF SFM. The stock is at a juncture. Will it bounce or break below key support?

SFM may be the strongest outperformer among the three stocks mentioned, but right now it’s at a juncture, attempting to stay above the two support levels at $130 and, below that, $125. A break below would suggest further downside to the $103–$105 range. If SFM rallies, it needs to break above near-term resistance just above $155 before challenging its all-time high at $180 to confirm the resumption of its uptrend.

Volume-wise, the Accumulation/Distribution Line (ADL) shows money flows just hovering on the bullish side, while the Relative Strength Index (RSI) is positioned slightly above “oversold” levels, suggesting that SFM has room to run if it bounces and reverses upward.

Next, take a look at this daily chart of CLX.

FIGURE 2. DAILY CHART OF CLX. Lots of technical headwinds up above.

From September to January, CLX has been trading in a wide range with two failures to take out a two-year high at $170. However, the January drop to $144 prompted investors to think that maybe CLX is at the onset of a downtrend (lower low and lower high) if not for the March bounce from the same level.

There’s a possibility that CLX may be stuck within a lower trading range given the numerous resistance levels above the current price. For CLX to break that cycle, it would have to rise above $159, the most immediate swing high while staying above $144. If CLX closes below $144, then you may see further declines to the $135 to $140 range. For now, keep an eye on how price responds to the $144 level.

Volume-wise, accumulation seems to be slowing, according to the ADL. The RSI is above the 30-line and shows room for upside advancement, but only if CLX’s current bullish reversal can gather more bullish momentum.

Now, shift over to a daily chart of DUK.

FIGURE 3. DAILY CHART OF DUK. On the verge of an all-time high?

DUK’s near-term rally aims to test $120, potentially pushing the stock into all-time high territory if successful. Watch for sustained upward momentum or a pullback to key support.

The RSI is hovering with a slight downward tilt but remains well below the overbought threshold. Meanwhile, the ADL indicates strong accumulation, reflecting the money flows pushing the stock toward $120. Watch the volume for confirmation if the stock breaks out, and look for signs of follow-through. If the breakout fails and the stock pulls back, a bounce off key support levels could present a favorable entry point.

At the Close

SFM, CLX, and DUK each offer distinct strategies for mitigating tariff risks. There are others as well. If any of these stocks interest you, add them to your ChartLists and use the tools suggested above, or any others available on StockCharts that might better suit your approach, to fine-tune your entry. The current tariff unpredictability can change the environment quickly, so pay attention to what’s going on in the news in case you need to modify or fine-tune your strategy.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Where can investors find a safe haven during a period of market uncertainty?  Personally, I think it’s as simple as focusing on the stocks managing to display bullish technical structures at a time when they are becoming remarkably rare!  Today we’ll use the StockCharts scan engine to identify charts showing strength despite broader market weakness.

There’s Strength in Financials But Not the Banks

The first chart on my list from this week’s scan, CME Group (CME), was featured in my recent podcast interview with Jay Woods, CMT.  We talked about how the financial sector had been quite strong so far in 2025, but that the really impressive charts were the exchanges.  

The simple fact that CME currently sits above two upward-sloping moving averages means this name is in a small subset of the S&P 500 that can still make that claim.  The momentum picture has remained quite strong, with recent pullbacks bringing the RSI no lower than the 40 level.  The improving relative strength at the bottom tells perhaps the most important story, showing how this stock has consistently outperformed the S&P 500 in 2025.

As long as the trend continues to form a pattern of higher highs and higher lows, and the moving averages continue to slope higher, I would consider this chart “innocent until proven guilty.” 

Auto Parts Remains a Strong Group in a Struggling Sector

While I’ve found numerous ideas in the Consumer Staples sector in 2025, given the renewed strength in this previously beaten down sector, this next chart is actually in the Consumer Discretionary sector.  Auto parts names like Autozone Inc. Nevada (AZO) have pulled back this week from an overbought condition, but the chart remains in a primary uptrend of higher highs and higher lows.

Similar to CME, we can observe a classic uptrend pattern over the last 18 months.  We can also see an ascending triangle pattern through much of 2024, with a fairly consistent resistance level and an upward-sloping trendline connecting the swing lows. The upside breakout in December 2024, followed by a retest of that previous resistance level into mid-January, seems to confirm the long-term bullish technical structure.

What strikes me about both of these charts is that they show no real signs of market instability.  At a time when it feels like pretty much everything is rotating lower amidst growing market turmoil, stocks that indicate they are somehow immune to bearish market forces deserve our respect and attention.

Three-Month Highs Often Signal Renewed Strength

How did I identify these winning names at a time when they seem very difficult to find?  I simply used the StockCharts scan engine to identify stocks making a new 13-week high.  You can copy and paste the text below into the Scan Workbench to run this scan using your own login.

[type = stock]

and [group is not ETF]

and [[exchange = NYSE] or [exchange = NASD]]

and [market cap > 5,000]

//and [group is SP500]

and [Weekly Close > Last Week’s MAX(13,Close)]

Those last two lines are the most important, as the rest is basically filtering the universe down to stocks traded on the major US exchanges with a market cap over $5 billion.  The fifth line has two slashes before the parameter “group is SP500”, which tells the scan engine to ignore that line.  I like to include that line in every scan I run, as I often toggle between a larger equity universe and then just to the S&P 500 members.

The final line looks for stocks where the current weekly closing price is higher than the previous 13 weekly closing prices.  And while this particular scan would certainly include stocks that have been in long-term uptrends for well over three months, I’ve found new three-month highs can be a great place to start to look for charts just beginning to emerge from a basing pattern.

For the other three stocks I found earlier this week using this scan, and much further detail on the technical implications of these charts, check out my latest video on the StockCharts TV YouTube channel!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

In this exclusive StockCharts video, Joe revisits a critical ADX signal that gave a major market warning, explaining the pattern and a new low ADX setup to watch. He breaks down SPY and QQQ support zones, sector rotation, and reviews viewer symbol requests including T, WBD, and more. Don’t miss this technical analysis update to stay ahead of the market!

This video was originally published on March 12, 2025. Click this link to watch on Joe’s dedicated page.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

Problem: How can you tell if an index is about to reverse—even before the price reflects it?

Answer: Look at what’s happening internally within the index—in other words, analyze market breadth, also called “participation.”

Spotting a Rebound in a Plunging Market

Like most investors, you look to the three major indices—DJIA, S&P 500, and the Nasdaq—to get an immediate glimpse of the market. But when all three are cratering, like most of the sessions we’ve seen this week and last, you often won’t find any early hint of a rebound or reversal from the indices themselves.

Indices can be misleading because they don’t reflect the movement of individual stocks within them. They are market-cap-weighted, meaning a few big stocks can skew the picture, masking broader market trends.

What this means is that, if you’re looking for signs that the market may be turning more bullish amid a wave of selling, you need to look at what’s happening internally. Are all stocks and sectors following the decline, or are some starting to rise—even if their movements aren’t reflected in the index price?

Enter the McClellan Oscillator

The McClellan Oscillator is one of many market breadth indicators that track the internal movements of the stock market and, by extension, the indices that represent them. Breadth indicators can help confirm trends and, more importantly, expose underlying weaknesses in rallies or hidden strengths in declines, helping you spot potential reversals before they appear in price.

Specifically, here’s a nutshell description of how the McClellan Oscillator works:

• It measures market breadth, tracking advancing vs. declining stocks to give a clear picture of overall participation.
• A reading above zero indicates bullish momentum (more advancing than declining stocks).
• A reading below zero suggests bearish momentum (more declining than advancing stocks).
• Crossovers help identify trend reversals. A crossover above or below zero can confirm a shift in market momentum.
• Divergences also suggest potential reversals early on. If the oscillator moves opposite the index, it may signal that a reversal may be underway.

The last two points are what I will focus on in this article. Given the current tariff-fueled plunge, are any of the three indices showing signs of a potential reversal? And, if not, what should you look out for?

Let’s start with the S&P 500 ($SPX). Here’s a daily chart. For a more expansive breadth context, I am including the Bullish Percent Index (BPI) to show yet another angle on market breadth.

FIGURE 1. DAILY CHART OF THE S&P 500. Buyers are jumping in at the key 61.8% Fibonacci Retracement level. But does the overall participation support this reversal thesis?

Anticipating a downside target, I drew a Fibonacci Retracement from the (2024) August low to the December high. Bullish traders anticipating a rebound at the 61.8% level have started to enter their positions.

From a market breadth perspective, it’s too early to tell whether this key support level will signal a reversal. The NYSE McClellan Oscillator (a large portion of S&P 500 stocks trade on the NYSE) shows that declining shares within the index outweigh the advancing shares. The BPI reading, on the other hand, confirms this reading, as fewer than 50% of S&P 500 stocks are generating Point & Figure buy signals, a condition favoring the bears as it also signals technical weakness.

What to look for in the coming sessions: Notice the pink lines on both the chart and the McClellan indicator window signaling divergences. Look for bullish divergences or a crossover above the zero line in the coming sessions. However, don’t treat these as automatic buy signals. Instead, they suggest potential bullish conditions, suggesting you construct an entry setup if one presents itself.

Now, let’s look at a daily chart of the Nasdaq 100 ($NDX).

FIGURE 2. DAILY CHART OF THE NASDAQ 100. Declines are starting to stabilize as buyers enter the market, but it may be too soon to call a reversal.

The Nasdaq 100 shows a similar Fib Retracement reaction as in the S&P 500 example above; namely, buyers are jumping in at the 61.8% level.

The McClellan Oscillator remains bearish, but declines appear to be stabilizing (see pink lines). Notably, communications and healthcare stocks are slowing the drop. While not a bullish reversal signal, this shift could lead to a turnaround depending on how other sectors react in the coming sessions. Meanwhile, the BPI at 35%, tells you that the current price environment continues to favor the bears.

What to look for in the coming sessions. Similar to the previous S&P 500 example, keep an eye on the McClellan Oscillator readings for any bullish divergence or a crossover above the zero line. Remember, these signals indicate improving market breadth and potential upward momentum, but they are not automatic buy signals. Once a positive shift occurs, it’s going to require further confirmation from price action, volume, and other technical indicators before you jump into a trade.

A Two-Step Process

What I just demonstrated was a simple two-step process. Feel free to tweak it according to your preference. When a major selloff is underway…

1. You need a means to forecast downside price targets. I used Fibonacci Retracements to set my downside targets (you can use other indicators to project potential support and resistance levels).
2. Use a breadth indicator like the McClellan Oscillator to gauge how prices react to those downside targets. Namely, divergences and crossovers should alert you to the possibility of a reversal.
3. Add other indicators to confirm the reversal when it happens. Don’t rely solely on one indicator; check price action, volume, and momentum, and have an exit plan in case it doesn’t follow through.

At the Close

Here’s the main point. You can use the McClellan Oscillator to anticipate turns in an index before it tips its hand, so to speak. It reveals shifts in market participation before such shifts become evident in prices. While major indices can be misleading due to their market-cap weighting, the oscillator focuses on breadth and momentum across all stocks and sectors comprising an entire index or market.

As of now, the S&P 500 and Nasdaq 100 show no clear signs of a bullish reversal. However, when a shift does occur, the McClellan Oscillator may be among the breadth indicators to signal it first—so keep an eye on it.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.