As I’ve discussed before, one of my favorite weekly emails comes from Tom McClellan. This week he dove into a different way to analyze the McClellan Oscillator. I found this important and thought I’d pass on Tom’s wisdom…
From Chart In Focus:
There is a rule that we use when interpreting the Oscillator’s structure: The complex side is the strong side. What I am referring to is a complex structure that is entirely above or below zero, with lots of chopping up and down but without a crossing of the zero line. When you see that, the message is that whichever side of zero it is forming on is the side that is in control. So a choppy complex structure above zero means that the bulls are in charge, whereas a complex structure below zero means that the bears are in charge.
A “simple” Oscillator structure is one where you see it move across the zero line and then turn straight around without building any complexity. Such a structure says that there is no control of the market by the side on which the simple structure forms.
Source: Overbought McClellan Oscillator
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