Thursday, October 29, 2009

Extreme Weakness Never Before Seen By This Measure

The McClellan Oscillator uses advance/decline data to calculate the strength or weakness of a move from a breadth standpoint. The value will vary from provider to provider as there are often slight differences in advance/decline data. Worden Bros. is one data provider I use. Their measure of the McClellan Oscillator hit -381.49 on Wednesday. This is the lowest reading since they began tracking advance/decline data in 1986. (Others I look at are low but not quite all-time lows.) Below is a chart of the McClellan Oscillator over the entire data period.

One notable about this chart is that breadth readings have become more extreme over time. Whereas moves above 100 and below -100 were rare from ’86 – ’93, they are fairly ordinary today.
For more information on the McClellan Oscillator you may visit the link below:


Anonymous said...

Nice posting... This should explain why market changes direction all of a sudden. People become more less confident, confused which side of the boat they should be taking as boat shakes wildly both sides where there is not much of a real direction. As for lesson to extract from it stick to yourside.

Anonymous said...

One of the reasons T2106 readings have become more extreme is the increase in traded issues on the stock market over time.

jgpietsch said...

Hi Rob, how did CBI come in yesterday? Have you stopped updating that? Maybe no need in a perennial bull market! Best, Jeff

Unknown said...

A big fan of breadth indicators, I recently started using Worden's software. I noticed that from time to time their $NYAD is well off. In the most recent occurrence on Oct. 29, when NYSE composite was up 2.8%, the $NYAD reading was negative (yes, negative) 907. Yesterday’s reading of –616 is not as outrageously wrong but also doubtful if you compare this number with other providers. Now, most likely they use $NYAD or the same data as goes into $NYAD to calculate other AD based indicators, including T2106 – the McClellan oscillator that you are discussing. I started doubting the reliability of Worden’s data and contacted them but no satisfactory response yet. Do you believe that you are using good enough data from Worden to base your trading decisions upon it? BTW – a first time commenter, I am a reader of your blog for about a year. In two words – very impressive. Thank you.