24 May 2012

Contrarian indicator spiked higher today.  Almost every time it reached this level a short-term pullback was imminent except for around November of 2009.

 The 89 day RSI for the McClellan Summation Index is at very low levels.  Levels that match up with other recent turning points.  The one turning point in red led to a decent rally, but the ensuing collapse after that brought the index to lower levels which is considered bearish in the way I use this index.

Only oversold in the 3rd and 4th panes.  These represent between 5 and 21 trading days.

The last pane is very long term and is not oversold at all.


"Significant changes in the growth rate of money supply, even small ones, impact the financial markets first. Then, they impact changes in the real economy, usually in six to nine months, but in a range of three to 18 months. Usually in about two years in the US, they correlate with changes in the rate of inflation or deflation."
"The leads are long and variable, though the more inflation a society has experienced, history shows, the shorter the time lead will be between a change in money supply growth and the subsequent change in inflation."
Milton Friedman