(StockFinder® screenshot of McClellan Summation Index in yellow plotted with S&P500 in green, red arrows mark important divergences between indicator and price.)

Tom McClellan’s hour at the LA Trader’s Expo started from a deep historical perspective and carried through to current market conditions.  Los Angeles was a fitting locale because it was actually reporting on local LA television stations that made popular the McClellan Oscillator and McClellan Summation Index.   These two indicators were developed by the speaker’s parents, Sherman and Marian McClellan respectively.   The McClellan Oscillator and Summation Index are market-wide indicators whose mission is to help traders and investors get an early sense of market trend, the strength of the trend, and impending changes.

Part of the talk focused on the construction of the McClellan Oscillator and the McClellan Summation Index.   Rather than repeat it here, you can find it at the McClellan website.  

One thing I want to highlight is that the McClellan Oscillator is the difference of two EMAs of the Advance/Decline line which means it is actually a MACD of the Advance/Declines.     Evidently both the McClellan Oscillator and the MACD were invented independently at about the same time.   What an interesting confluence of events!

Another somewhat geeky point is that the Advance/Decline data varies between vendors.   The Yahoo data includes ETFs while the Wall Street Journal Advance/Decline number does not include ETFs.    According to Tom McClellan, the difference in end results is not that large, but its nice to see that he is on top of data sources and using clean data for his calculations.

Tags: Advance/Decline, indicator, McClellan Oscillator, McClellan Summation Index, Traders Expo