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McClellan Volume Oscillator and Volume Summation Index FAQ


Introduction
These definitions begin with the basics (advance-decline volume statistics) and then work their way down to the formulas (McClellan Oscillator, McClellan Summation Index). These indicators are based on percentages, not absolute values. The Russell 2000 has 2000 stocks and the Nasdaq 100 has 100 stocks. Because the Russell 2000 has 1900 more stocks than the Nasdaq 100, we cannot really compare indicators that use absolute numbers like Net Advancing Volume (advancing volume less declining volume). Instead, it is more robust to calculate advances, declines, net advances, advancing volume and declining volume as a percentage of the whole. This makes it possible to compare breadth indicators for the Russell 2000 against breadth indicators for the Nasdaq 100. This also makes it possible to compare breadth indicator across a whole range of indices and ETFs. Back to Top
Advance Volume%
The total volume of advancing stocks as a percentage advancing plus declining volume. If the volume of advancing stocks was 800 million shares and the total volume of declining stocks was 200 million shares, then Advance Volume% would equal 80%. 800/(800+1000) = 800/1000 = .80 = 80%. Back to Top
Decline Volume%
The total volume of declining stocks as a percentage advancing volume plus declining volume. If the volume of advancing stocks was 800 million shares and the total volume of declining stocks was 200 million shares, then Decline Volume% would equal 20%. 200/(800+200) = 200/1000 = .20 = 20%. Back to Top
AD Volume Net%
Advance Volume% minus Decline Volume%. Using the examples above, AD Volume Net% would equal +60% (80% - 20% = +60%). Readings above +50% show above average strength and readings below -50% show above average weakness. Big moves often start with a big advance (above 80%) or a big decline (below -80%) in AD Volume Net%. Back to Top
AD Volume Line
A cumulative measure of AD Volume Net%. The AD Volume Line is a running total of AD Volume Net%. Positive AD Volume Net% increases the cumulative value and the line moves higher. Negative AD Volume Net% decreases the cumulative value and the line moves lower. The plot of AD Volume Line can then be compared to the price plot of the underlying security to affirm or question the trend. A strong security should also have a strong AD Volume Line. Weakness in the AD Volume Line often foreshadows weakness in the security and visa versa. Back to Top
McClellan Volume Oscillator
The McClellan Volume Oscillator is a short-term momentum indicator for breadth that uses the difference between two exponential moving averages (just like MACD). Marian and Sherman McClellan developed the McClellan indicators and detailed information can be found at the McClellan website (Click Here). The formula is as follows:

39-period EMA of AD Volume Net% -
19-period EMA of AD Volume Net%

The McClellan Volume Oscillator oscillates above and below the zero line. It is positive when the shorter (faster) moving average is greater than the longer (slower) moving average and negative when the shorter moving average (faster) is less than the longer moving average (slower). The indicator can be used just like MACD or any other momentum oscillator. Signals are derived from positive and negative divergences, crosses above and below the zero line or overbought and oversold readings. Back to Top

McClellan Change
The absolute change in the McClellan Volume Oscillator from the previous close. If the oscillator moves from -20 to -10, then the change would equal +10. If the oscillator moves from +40 to +20, then the change would be -20. Back to Top
Alerts
An alert is triggered when the McClellan Volume Oscillator moves above or below the zero line. BullX signals a bullish crossover or a move from negative territory to positive territory. BearX signals a bearish crossover or a move from positive territory to negative territory. Back to Top
McClellan Volume Summation Index
The McClellan Volume Summation Index is a long-term breadth indicator based on the McClellan Volume Oscillator. In a nutshell, the McClellan Volume Summation Index is a cumulative measure of the McClellan Volume Oscillator. Each period's Oscillator reading is applied to the previous day's Summation Index. This makes the Summation Index a running total of the Oscillator values. Positive Oscillator readings increase the Summation Index and move it higher. Negative Oscillator readings decrease the Summation Index and move it lower. The original formula is as follows:

1000 + Previous Day's McClellan Summation Index
+ Current Day's McClellan Oscillator.

Marian McClellan added 1000 to keep the index in positive territory. This also makes the indicator oscillate above and below +1000.

Mathematician James Miekka developed a different formula for the McClellan Summation Index and Tom McClellan has endorsed this formula. In the original formula, the value of the Summation Index depends on when the calculation was started and one must know the previous value of the Summation Index. This presents a chicken and egg problem. Miekka's formula solves this problem by not requiring the previous value. The Miekka formula is as follows:

(19 x 39-period EMA of AD Volume Net%) -
(9 x 19-period EMA of AD Volume Net%)

Miekka originally added 1000 to jibe with the original formula. The version above does not include the artificial addition of 1000 and therefore oscillates above the below the zero line. This makes it easier to identify positive and negative crossovers. Strong trends develop when the indicator remains positive or negative for a sustained period of time. The indicator can be used just like any other momentum oscillator. Signals are derived from positive and negative divergences, crosses above and below the zero line or overbought and oversold readings. On the short-term chart, a 20-day EMA is overlaid and investors can look for crosses above and below this moving average for signals as well. The long-term chart uses a 50-day EMA. Back to Top

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