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[EquisMetaStock Group] Re: McClellan Summation Index



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Larry,

You have an interesting site.
You may want to consider the ratio adjusted version of the McClellan 
oscillator and index. The ratio adjusted version has been described 
in a number of places, here is Carl Swenlin's description.

Ross


RATIO ADJUSTED McCLELLAN OSCILLATOR CALCULATION

The increasing number of issues traded on the NYSE over the years has 
caused the McClellan Oscillator and other breadth indicators to reach 
greater high and low extremes over the years, but these new record 
highs and lows did not accurately reflect the true internal condition 
of the market.

For example, let's compare the 1968-70 and 1998 Bear Markets, 
representing declines of about 36% and 20% respectively. Even though 
the 1968-70 decline was much more severe, the McClellan Summation 
Index readings (traditional calculation) were -2252 for 1970 and -
3526 for 1998, giving the false impression that the 1998 Bear Market 
was worse than 1968-70. Using a ratio-adjusted calculation the 
Summation Index reading for the 1970 low was -2402 compared to the 
1998 low of -1444, clearly reflecting the proportional relationships 
of the two bear markets, and making it possible to make an accurate 
historical comparison.

This is an important change. For McClellan Oscillator aficionados, 
there are two basic differences in the calculations. First, the basic 
input for the ratio-adjusted version is no longer the daily advances 
minus declines. Rather you (1) subtract declines from advances, (2) 
divide the result by the total of advances plus declines, and (3) 
multiply that result by 1000. (Multiplying by 1000 is simply cosmetic 
and lets us work with whole numbers instead of decimals.) The rest of 
the calculations for the Oscillator are the same. The second 
difference is that zero (0) is now considered neutral for the 
Summation Index, so you no longer begin with 1000 in your Summation
Index calculation.


--- In equismetastock@xxxxxxxxxxxxxxx, "Larry Carhartt" <lc@xxxx> 
wrote:
> By the way, in addition to the data necessary to compute the 
Summation index
> on the NYSE, AMEX and NASDAQ, you can also download similar data 
for many
> major indexes and sector ETFs at my site 
(http://www.masterdata.com).  These
> text datafiles already contain the proper MetaStock headers so 
import is
> very easy.  I agree that the Summation index is very helpful for 
the market
> overall, but is also just as enlightening and maybe more so on 
these more
> defined composites both individually and as a whole.  When we 
recently saw
> the various sectors deteriorate one by one within the markets it 
gave great
> insight as to the likelihood that the overall market would 
eventually
> follow.  It did.  Strengthening will show itself eventually, but, 
perhaps,
> not just yet.
> 
> Best,
> 
> Larry Carhartt
> Index & ETF Component Data
> www.MasterDATA.com
> lc@xxxx
> 818-701-6686
> 




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