Time To Start Getting REALLY Bullish? | Tom McClellan

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Tom McClellan (0:45)

So, I'm not bullish today, but I am looking for the moment probably within the next week to turn bullish, and then I'm going to be bullish as all get out.

Adam Taggart (1:01)

Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Welcome you here for a discussion on the latest in market technical analysis with one of the best TA guys out there. Of course, we're talking about Tom McClellan of McClellan Oscillator. Tom, how are you doing?

Tom McClellan (1:16)

Doing great, Adam. Great to see you again.

Adam Taggart (1:19)

Great to see you as well. We are talking just so the audience knows, we're recording this within an hour or so of the latest Federal Reserve news.

Folks, I'll be deconstructing that. In fact, by the time you've seen this video with Tom, you've probably seen my live stream with Axel Merck doing a play-by-play deconstruction of everything that the Fed released today. But Tom, these are interesting times, and there are few people I know who are able to tease out the whys and the hows of how times are interesting than you. You have all sorts of wonderful charts. We're going to go through a bunch of them. But the correlations that you come up with always just blow my mind. Anyways, we'll get to the charts quickly. But first, can you just give a sense for the character and the tenor of this market compared to previous market times and cycles you've seen across your long career?

Tom McClellan (2:18)

This is a strong market.

We are in the first two years of a presidential term, which are supposed to be sideways, and the market is doing a very, very upward version of sideways. If you want an explanation for why that is, I would say that we are not taxing Americans to the hilt, and we're leaving more money in the economy as opposed to in the government's coffers. That creates problems for the government, but it creates great conditions for the economy because we're not eating our seed corn. And if you leave more money in the hands of people, they go out and spend it and build factories and do things with it other than pay the government. As I said before, it creates problems for the government, but it's great for the stock market. And I see continued great things for the stock market ahead. If you want to jump right into the charts I brought, we can talk about why.

Adam Taggart (3:10)

Well, yeah, far better for me to stand in between now and then. So yeah, why don't you pull up your charts and elucidate all for us?

Tom McClellan (3:17)

I call this my Rapunzel chart.

And it's basically the way that we construct the presidential cycle pattern. That's the name that technical analysts use for talking about how the stock market has regular repeating four-year patterns of behavior. And so the way you find that out is you chop the market up into four-year chunks of time, you reset them all to the same initial value, and then you average them together. So this is what they all look like independently, and it looks like a mess, but when you average them together, it looks like this. I do it a little bit differently than other people do, where I start at November 1st, that's when election time is. And so you can see that for the first couple of years, the market is generally sideways, and then year three is great, and year four is also upward, although a little bit iffier because we're heading into election. So we're about to head into year three, which is a wonderful time for the stock market. In fact, it's nearly always up. A couple of times it didn't work that way. One was 1931 when we were in the middle of the Great Depression. Another was 1939 when the Wehrmacht was marching through Poland, and you didn't get an up year. So absent conditions like that, you can count on the third year being an up year.