Technical Analysis says Buy, but Risk Managers Prevail

One of the things that I have loved about technical analysis is that it can be really objective.  Lately it seems that the McClellan Oscillator has gained popularity and it is one indicator that I have liked to use.  Just go to my search box and type in McClellan and you can see that I have written about it many times.  Ever since our first dip below -200 on the McClellan I was anticipating a divergence in the SPX and the McClellan Oscillator.  As shown below we have that now:

Previously I have written about McClellan positive divergences with highlights on the chart and can be found below:

What am I saying here?  The hardest thing about trading is anticipating what the fundamental or economic data means in the long run.  This is one reason I like history and I like technical analysis, looking back I can see divergences in the market (via SPX) and the McClellan Oscillator has led to positive returns.

Does this mean the bottom is in; not by any means.  It just tells me as a manager of risk that I would rather leg into longs rather than shorts or just be in cash and let things settle out.  Don’t ever forget that selling can lead to more selling despite what any technical indicator tells you and it is the professionals of risk management that will prevail.