((Today's Adv minus Decl - Prior Day's 5% Index) *
0.05) + Prior Day's 5% Index = Today's 5% Index
((Today's Adv minus Decl - Prior Day's 10% Index)
* 0.10) + Prior Day's 10% Index = Today's 10% Index
(Note: The first time you begin to calculate
an exponential average, you must calculate a simple moving average.)
Today's 10% Index - Today's 5% Index = Today's
The McClellan Oscillator is a market breadth indicator that is based on
the smoothed difference between the number of advancing and declining
issues on the New York Stock Exchange.
The McClellan Oscillator was developed by Sherman and Marian McClellan.
Extensive coverage of the oscillator is provided in their book Patterns
Indicators that use advancing and declining issues to determine the
amount of participation in the movement of the stock market are called
"breadth" indicators. A healthy bull market is accompanied by a large
number of stocks making moderate upward advances in price. A weakening
bull market is characterized by a small number of stocks making large
advances in price, giving the false appearance that all is well. This
type of divergence often signals an end to the bull market. A similar
interpretation applies to market bottoms, where the market index
continues to decline while fewer stocks are declining.
The McClellan Oscillator is one of the most popular breadth indicators
(another popular breadth indicator is the Advance/Decline Line). Buy
signals are typically generated when the McClellan Oscillator falls into
the oversold area of -70 to -100 and then turns up. Sell signals are
generated when the oscillator rises into the overbought area of +70 to
+100 and then turns down.
If the oscillator goes beyond these areas (i.e., rises above +100 or
falls below -100), it is a sign of an extremely overbought or oversold
condition. These extreme readings are usually a sign of a continuation
of the current trend.
For example, if the oscillator falls to -90 and turns
up, a buy signal is generated. However, if the oscillator falls below
-100, the market will probably trend lower during the next two or three
weeks. You should postpone buying until the oscillator makes a series of
rising bottoms or the market regains strength.
McClellan Summation Index (Original Method):
Yesterday's Summation Index + Today's McClellan
Oscillator = Today's Summation Index
The McClellan Summation Index is a market breath indicator based on the
The McClellan Summation Index was developed by Sherman and Marian
McClellan. Extensive coverage of the index is provided in their book
Patterns for Profit.
The McClellan Summation Index is a long-term version of the McClellan
Oscillator. Its interpretation is similar to that of the McClellan
Oscillator except that it is more suited to major trend reversals.
As explained in the Calculation section, there are two methods to
calculate the Summation Index. The two calculation methods create
indicators with identical appearances, but their numeric values differ.
These interpretational comments refer to the "suggested" calculation
method explained in the Calculation section.
McClellan suggests the following rules for use with
the Summation Index:
Look for major bottoms when the Summation Index
falls below -1,300.
Look for major tops to occur when a divergence
(page 29) with the market occurs above a Summation Index level of
The beginning of a significant bull market is
indicated when the Summation Index crosses above +1,900 after moving
upward more than 3,600 points from its prior low (e.g., the index moves
from -1,600 to +2,000).
Disclaimer: This material is for your private
information. We are not soliciting any action based upon
it. Opinions expressed are present opinions only. The
material is based upon information considered reliable,
but we do not represent that is accurate or complete,
and it should not be relied upon as such. We, or persons
involved in the preparation or issuance of this material
may, from time to time, have long or short positions in,
and buy or sell the securities or options of companies