The McClellan Oscillator: How to Measure Market Breadth and Momentum
The McClellan Oscillator: How to Measure Market Breadth and Momentum
The McClellan Oscillator is a market breadth indicator that helps traders analyze momentum shifts in advancing and declining stocks. It provides insight into overall market strength and trend reversals.
In this guide, we’ll break down how the McClellan Oscillator works, how to use it effectively, and the best trading strategies.
What Is the McClellan Oscillator?
The McClellan Oscillator measures the difference between two Exponential Moving Averages (EMA) of advancing and declining stocks on a stock exchange.
Key Features of the McClellan Oscillator:
- Positive values → Bullish market momentum.
- Negative values → Bearish market momentum.
- Crossing above zero → Uptrend confirmation.
- Crossing below zero → Downtrend confirmation.
How the McClellan Oscillator Is Calculated
The McClellan Oscillator formula is:
[
\text{McClellan Oscillator} = 19\text{-day EMA of Net Advances} – 39\text{-day EMA of Net Advances}
]
Where:
- Net Advances = Advancing stocks – Declining stocks.
- 19-day EMA reacts faster to market shifts.
- 39-day EMA smooths out longer-term trends.
The McClellan Summation Index (a cumulative version of the oscillator) helps track long-term market trends.
How to Use the McClellan Oscillator in Trading
Identifying Market Breadth Trends
- If the McClellan Oscillator is above zero, market breadth is bullish.
- If the McClellan Oscillator is below zero, market breadth is bearish.
McClellan Oscillator Divergence Strategy
- Bullish Divergence: The market makes a lower low, but the oscillator makes a higher low → Potential reversal upward.
- Bearish Divergence: The market makes a higher high, but the oscillator makes a lower high → Potential reversal downward.
McClellan Overbought/Oversold Strategy
- Above +100 → Market may be overbought, expect possible pullback.
- Below -100 → Market may be oversold, expect possible bounce.
Best McClellan Oscillator Trading Strategies
McClellan + Moving Average Strategy
- Buy when McClellan Oscillator crosses above zero and price is above the 50-day SMA.
- Sell when McClellan Oscillator crosses below zero and price is below the 50-day SMA.
McClellan + RSI Strategy
- Buy when McClellan Oscillator is rising and RSI is below 30 (oversold).
- Sell when McClellan Oscillator is falling and RSI is above 70 (overbought).
McClellan + MACD Strategy
- Use MACD crossovers to confirm McClellan trend shifts.
- If McClellan is above zero and MACD is bullish → Strong buy signal.
- If McClellan is below zero and MACD is bearish → Strong sell signal.
Best McClellan Oscillator Settings for Different Trading Styles
- Day Trading: Use a faster EMA combination (10, 20) for quicker momentum shifts.
- Swing Trading: Default (19, 39) settings for balanced market analysis.
- Long-Term Investing: Use (20, 50) settings for tracking macro trends.
Common McClellan Oscillator Mistakes to Avoid
❌ Ignoring price action – Market breadth should confirm actual price trends before trading.
❌ Overreacting to short-term signals – Always check multiple timeframes before making decisions.
❌ Using McClellan in isolation – Combine with MACD, RSI, or moving averages for stronger signals.
Final Thoughts – Should You Use the McClellan Oscillator?
The McClellan Oscillator is a powerful market breadth tool for detecting momentum shifts and trend reversals. When used with moving averages, RSI, or MACD, it enhances trade accuracy and market analysis.
📌 Want to Trade With the McClellan Oscillator?
Try applying McClellan settings on different assets and test how it performs in trending vs. ranging markets!
