Wednesday, June 15, 2005 2:34:51 AM
After The Bell: 6/14/2005 McClellan Oscillator
This is probably one of the most peculiar technical pattern that I’ve seen in a while.
McClellan Oscillator is a market breadth and momentum indicator. It’s basically a ratio of the daily advance issues to the total advance/decline issues on the big board. The 0 line is where the 19-day EMA (Exponential Moving Average) crossed above or below the 39-day EMA, and hence the buy or sell signals.
McClellan recent uptrend started on March 24, more than 2.5 months ago. It had just broken this uptrend last week (yellow highlight). This is the longest lasting McClellan uptrend that I’ve seen in a long while, yet the big board index merely advanced 0.977%. The sidetracking of the NYSE Index movement in the upper pane and the McClellan uptrend in the lower pane simply didn’t look like they belong to each other.
I believe this is a good example of how the decimal pricing system had skewed the advance/decline issue statistics. If a stock gained $0.01, it’s counted as an advance. And, the recent low trading volume affects this statistics even more profoundly.
In any case, this divergence spells “Danger”. The fact that McClellan had just broken the recent uptrend makes it even more so. Let’s all proceed with extreme caution.
This is probably one of the most peculiar technical pattern that I’ve seen in a while.
McClellan Oscillator is a market breadth and momentum indicator. It’s basically a ratio of the daily advance issues to the total advance/decline issues on the big board. The 0 line is where the 19-day EMA (Exponential Moving Average) crossed above or below the 39-day EMA, and hence the buy or sell signals.
McClellan recent uptrend started on March 24, more than 2.5 months ago. It had just broken this uptrend last week (yellow highlight). This is the longest lasting McClellan uptrend that I’ve seen in a long while, yet the big board index merely advanced 0.977%. The sidetracking of the NYSE Index movement in the upper pane and the McClellan uptrend in the lower pane simply didn’t look like they belong to each other.
I believe this is a good example of how the decimal pricing system had skewed the advance/decline issue statistics. If a stock gained $0.01, it’s counted as an advance. And, the recent low trading volume affects this statistics even more profoundly.
In any case, this divergence spells “Danger”. The fact that McClellan had just broken the recent uptrend makes it even more so. Let’s all proceed with extreme caution.
David
#board-3693
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