Stocks Vulnerable to Near-Term Correction

10/12/2010 12:01 am EST

Focus: STRATEGIES

Thomas Aspray

, Professional Trader & Analyst

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Even though the Advance/Decline (A/D) line continues to act stronger than prices, which is positive for the intermediate-term trend, some of the short-term A/D studies, like the McClellan Oscillator, are lagging. For the NYSE stocks, the Oscillator has been locked between -60 and +60 for the past two weeks. Typically, the recent price gains would have pushed the McClellan Oscillator to overbought levels above +200, and the Nasdaq shows a similar picture. This suggests that the market is vulnerable to a sharp, yet short correction over the near term.

Tom Aspray, professional trader and analyst, serves as video content editor for MoneyShow.com. The views expressed here are his own.