The NYSE common only issues, components of the NYA, completed a MCO initiation thrust as of the Tuesday, 11-22-05 close.
Below is the $ weighted Up-Down volume MCO for the common stocks traded on the NYSE. The image is a bit messy due the time frame, but to illustrate the consequences of the recent MCO pattern, the chart includes NYA $ weighted UD volume ($UD) MCO action since 2002.
Since the bull market began in 2003, the $UD MCO for common stocks has telegraphed an initiation thrust when the MCO did not violate its -85 level prior to rallying above +75. In mid-October 2005, this indicator bottomed at -74 and closed at +79 yesterday. This pattern usually results in a short term price pullback or consolidation, but has not been a termination point for price advances since the 2003 bottom. Higher price highs have followed any near term price weakness over the past four of these patterns.
When the $UD MCO momentum lows are below the -85 level, then rally above +75, price advances typically terminate at the MCO's peak and lower price lows follow over the next few months. The criteria for lower price lows going forward have not been met on this most recent $UD MCO pattern.
Of course, this time could be different, but $UD MCO patterns such as the current one, have resulted in initiation thrust moves over the past 30+ months, and following any near term weakness, we should expect higher prices going forward.
Note: The common only $UD volume indicators are an output of a collaborative project with McClellan Financial Publications. My interpretation of this data is not necessarily that of Tom or Sherman McClellan.