McClellan Oscillator

McClellan Oscillator

An indicator of future market movements related to the number of advancing or declining securities on the NYSE, as opposed to the average price change. The McClellan Oscillator is calculated by taking a 19-day exponential moving average (EMA) of the net number of securities that are advancing and subtracting a 39-day EMA of the same thing. That is, the McClellan Oscillator is expressed as:

Oscillator = (19-day EMA of securities advancing - securities declining) - (39-day EMA of securities advancing - securities declining).

The importance of the McClellan Oscillator comes from the fact that price averages may be driven by only a few securities. That is, a few securities may be making large gains while the rest of the securities on the NYSE are posting losses, or vice versa. A price average, then, may not reflect the true conditions of the market. The McClellan Oscillator attempts to control for this.