The McClellan Oscillator is a technical analysis tool that is used by market traders to evaluate the direction of the market’s momentum. A positive reading indicates an uptrend, while a negative reading indicates a downtrend.
The McClellan Oscillator was developed by Sherman McClellan in 1969 and is basically a sum of two exponential moving averages (EMA). The first EMA is a summation of 19 day exponentials, and the second EMA is a summation of 39 day exponentials. The result in the form of a curve is the McClellan Oscillator. The oscillator oscillates between positive and negative, above zero and below zero.
When the McClellan Oscillator is above zero, it suggests that the momentum of the market is strong and bullish. Traders may then buy even further in anticipation of market upside potential. On the contrary, when the oscillator is below zero, it indicates that the momentum of the market is weak and bearish. Traders may then reduce their positions or move their funds to other asset classes.
The McClellan Oscillator can be useful for traders in many ways, especially in helping to determine the direction of the market’s momentum. However, traders should take caution when using this tool as it can be deceiving. It is important to look for confirmation from other technical analyses tools before making a trading decision and to always consider the overall picture of the market.
Overall, the McClellan Oscillator can be a useful tool for traders to assess the way in which the momentum of the market is trending. It is, however, important to look at other technical indicators for confirmation and to monitor the overall developments in the market. This will help traders make the best possible decisions and use this simple structure above zero for their advantage.