Stocks & Commodities V. 23:12 (36-41): Breadth Of Fresh Air by Gregory L. Morris
The significance of the levels of the McClellan summation index can help improve your trading results.
I was writing my second book, The Complete Guide To Market Breadth Indicators, when I became aware of some significant facts. Here’s one: If you had to I select one market breadth indicator that would tell you when to invest and when to be on the sidelines, which would it be? During my research, I discovered it would be the McClellan summation index.
Why, you ask? I’ll tell you — but before I do, here’s a quick rundown on the topics I’ll have to cover in order to fully explain why:
• An exponential moving average (EMA), which gives more weight to the most recent data and is quicker at responding to price action than the more common simple moving average.
• Advancing issues (A = advances), which are the number of stocks that increased in price during the day.
• Declining issues (D = declines), which are the number of stocks that declined in price during the day.
• The advance decline line, which is the daily difference between advances and declines, and then a running sum is maintained each day.