Tom McClellan

Defining the McClellan Oscillator

Readers wishing to learn more about the McClellan Oscillator and other indicators developed by the McClellans should check out our web site, mcoscillator.com.

Tom McClellan

McClellan Oscillator at Decade All Time Highs

It has long been a complaint that the supposedly "interest rate sensitive" issues traded on the NYSE are polluting the A-D data, making indicators like the A-D Line or the McClellan Oscillator and Summation Index suspect in their indications.

What we have found, however, is that issues like preferred stocks and bond funds tend to give better indications than the common stocks. Yes, that's right. The "uncommon" issues give better indications about what the overall market will do than the common stocks.

Why would this be? The answer is that those "uncommon" issues are terrible sensitive to liquidity. When liquidity is great, they will do well, and the market as a whole will prosper. When liquidity starts to turn bad, these issues will usually reflect that first, like the canaries formerly used in coal mines to detect bad air before it killed the miners.

The ability of the stock market to pull off a new record all-time high McClellan Oscillator reading is a message that liquidity is in great supply, and is likely to continue flowing into the market for some time to come.

As for the assertion that +/-100 on the Oscillator marks overbought or oversold territory, that used to be true years ago when there were fewer issues traded. And that also applied to the raw McClellan Oscillator, not the ratio-adjusted versions. Rather than focus on a single value, it is better to gauge the current level relative to recent market action. You can see a chart posted every day on our web site at www.mcoscillator.com/D....

We also have a Learning Center with several short articles to help people learn more about our indicators and the work that we do.