McClellan Oscillator

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McClellan Oscillator

Key takeaways

  • A market-breadth indicator based on advances minus declines across an exchange (e.g., NYSE, NASDAQ).
  • Calculated as the difference between a 19-day EMA and a 39-day EMA of advances−declines (or an adjusted net-advances series).
  • Readings above zero generally confirm index strength; readings below zero confirm weakness.
  • Large moves from negative to positive (often ~100 points) are called breadth thrusts and can signal strong reversals.
  • Use with price action and other indicators—false signals and choppiness are common.

What it is

The McClellan Oscillator measures market breadth by comparing short‑term and intermediate‑term exponential moving averages (EMAs) of the difference between advancing and declining issues. It highlights shifts in market sentiment, confirms or warns about index trends, and can reveal divergences between breadth and price.

Formula

Basic (original) form:
McClellan Oscillator = 19-day EMA(Advances − Declines) − 39-day EMA(Advances − Declines)
Typical EMA smoothing factors used:
* 19-day EMA multiplier ≈ 0.10
* 39-day EMA multiplier ≈ 0.05

Adjusted form (normalizes for changes in the number of issues):
ANA = (Advances − Declines) / (Advances + Declines)
McClellan Oscillator (adjusted) = 19-day EMA(ANA) − 39-day EMA(ANA)

EMA calculation (recursive):
EMA_today = (CurrentValue − EMA_yesterday) * α + EMA_yesterday
where α is the smoothing constant (≈0.10 for 19-day, ≈0.05 for 39-day). For the first EMA estimate, use a simple average of the series over the period.

How to calculate (summary)

  1. For each day, compute Advances and Declines (number of stocks up vs. down from prior close).
  2. Use either Advances − Declines or ANA = (Advances − Declines)/(Advances + Declines).
  3. Compute an initial simple average for the first 19- and 39-day values; use these as the prior-day EMA.
  4. Apply the EMA recursion daily to get the 19-day and 39-day EMAs.
  5. Subtract the 39-day EMA from the 19-day EMA to get the McClellan Oscillator.

How to interpret it

  • Positive value: more stocks advancing on average (shorter-term breadth stronger than intermediate-term) — supports a rising index.
  • Negative value: more stocks declining on average — supports a falling index.
  • Crossovers (oscillator crossing zero): can indicate a change in the market trend.
  • Breadth thrust: a rapid, large move (commonly measured as ~100 points or more) from negative to positive—suggests a strong, broad-based reversal to the upside.
  • Divergence:
  • Bullish divergence — oscillator rising while index falls: breadth improving ahead of price.
  • Bearish divergence — oscillator falling while index rises: fewer stocks supporting the advance; caution.

McClellan Oscillator vs. McClellan Summation Index

  • The Oscillator is a non‑cumulative, short‑to‑intermediate breadth momentum measure.
  • The Summation Index is the running cumulative total of daily McClellan Oscillator values and is used to assess longer‑term breadth trends.

Limitations and best practices

  • Produces many signals—some are false. Do not rely on it alone.
  • Can be choppy; frequent crosses between positive and negative indicate a whipsaw market.
  • Best used alongside price action, trend analysis, volume, and other technical indicators.
  • Study its behavior across different market regimes and exchanges before using it in trading decisions.

References (selected)

  • McClellan, S. Patterns for Profit: The McClellan Oscillator and Summation Index.
  • Devcic, J. “Understanding McClellan’s Oscillator & Summation Index.” Technical Analysis of Stocks & Commodities.