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A couple of years ago, I did some back testing of the McOsc using %adv and %dec
as a percentage of total issues instead of #adv and #dec. It was my judgement
that the difference in results over some 30 years did not warrant tinkering with
the original formula.
Earl
-----Original Message-----
From: Kovacs, Ross R <KOVACSRR@xxxxxxx>
To: 'ariel@xxxxxxxx' <ariel@xxxxxxxx>; 'fpi@xxxxxxxxxxxx' <fpi@xxxxxxxxxxxx>
Cc: 'omega-list@xxxxxxxxxx' <omega-list@xxxxxxxxxx>
Date: Friday, August 21, 1998 9:43 AM
Subject: McClellan Oscillator
>The McClellan Oscillator and the McClellan Summation both have a fundamental
>problem: they rely on the difference between two exponential moving
>averages of advancing and declining issues. As we all know, there has been
>a steady increase in the number of issues traded on the NYSE. Therefore,
>the Oscillator and Summation indices are moving faster and to greater
>extremes simply because more issues are traded.
>
>The McClellan's who developed their indicators recognize this problem.
>Although it's not widely publicized, a simple change in definition solves
>the problem. Don't subtract the difference between the two exponential
>averages, divide the faster MA by the slower MA. These "adjusted"
>indicators are far more valuable to anyone who is looking at the indicators
>over many years. For short term traders, it probably doesn't make a
>difference as long as they know that extreme values are more easily reached
>due to the greater number of issues traded.
>
>This adjustment is similar to using a rate of change indicator vs. a
>momentum indicator.
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