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The McClellan Oscillator uses advancing issues and declining issues on the New York Stock Exchange (NYSE) to gauge market breadth. The components are:
- Advancing Issues – Declining Issues
- Calculate both the 19 & 39-day exponential moving average (EMA) of [Advancing Issues – Declining Issues]
- Plot the result of the 19-day EMA minus the 39-day EMA
The McClellan Oscillator is shown next on the chart of the Nasdaq 100 QQQQ's:
Just like the MACD, when the short-term moving average crosses above the longer term moving average, the plotted line crosses the zero line. Therefore, when the McClellan Oscillator crosses above zero, the trend of the advance-decline issues is positive = bullish sign. In contrast, when the McClellan Oscillator crosses below zero, the trend of the advance-decline issues is negative = bearish sign.
Generally, above +70 is considered an overbought condition and below -70 is an oversold condition.
McClellan Oversold Potential Buy Signal
A trader might consider a buy signal when the McClellan Oscillator crosses above the -70 oversold line.
McClellan Overbought Potential Sell Signal
Similarly, a trader might consider a sell signal when the McClellan Oscillator crosses below the +70 overbought line.
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