Third Low in McClellan Oscillator is Bullish Sign

When my parents wrote Patterns For Profit in 1970 to introduce the McClellan Oscillator and Summation Index to the world, they emphasized the point that the patterns in the structure of the indicators mattered more than the numerical levels.  One of the patterns that they highlighted was seeing a 3rd bottom in the Oscillator, higher than the prior two.  We just had one of these, conveying a big bullish message for the stock market.

The McClellan Oscillator measures acceleration in the Advance-Decline data.  Negative readings mean that there has been downward acceleration.  The observation that there are subsequent higher negative readings after the lowest one means that the downward acceleration is slowing.  That is a precursor to a change of price trend.  That is the setup, but not a signal by itself.

The confirmation this time came first with the Oscillator breaking its own declining tops line.  Then more confirmation came with the Oscillator going up above the zero line, signaling a switch to upward acceleration.  That does not necessarily mean upward movement for the A-D Line, since a change from downward to sideways constitutes upward acceleration in physics terms. 

The Oscillator can next give us additional confirmation of a bullish change by zooming up to a really high positive reading.  Very low negative readings are usually conclusive in their nature.  But a very high positive reading is a sign of strong initiation of an uptrend.  We have not yet gotten that piece of confirmation.  It will be something to look for in the days ahead.

We feature a chart of the McClellan Oscillator in every issue of our twice monthly McClellan Market Report, and frequently in our Daily Edition.  You can see a copy of the chart above every day at the "Breadth Data" page at our web site.  And you can read more free articles about the McClellan Oscillator here: https://www.mcoscillator.com/learning_center/kb/mcclellan_oscillator/