ADVANCE-DECLINE LINE
The Advance-Decline Line tells us whether the 3,500 stocks on the NYSE are advancing with the 30 stocks on the $INDU and the 500 on the $SPX. Look out for divergences in the peaks. Typically, the AD line peaks before the Dow.
McCLENNAN SUMMATION INDEX
The McClennan Oscillator is the difference between the 19 day and the 39 day EMA of the daily advance-decline line. The McClennan Summation Index is the cumulative sum of each day's value of the oscillator. Crosses above and below the zero line suggest major market turning points.
NYSE NEW HIGH-NEW LOW INDEX
The NYSE New High-New Low Index is the ratio of the number of stocks hitting new 52 week high over the ones hitting new 52 week lows.
1. Watch out for divergences, as they often suggest a turning point.
2. Extreme values are also valid indicators of tops or bottoms.
3. Crosses above and below the zero line reflect shifts in market psychology.
PERCENTAGE OF NYSE STOCKS ABOVE 200-DAY MA
When the 20-day MA of the percentage of NYSE stocks above their 200-day MA falls below 50, another red light should go on in the investor dashboard. Conversely, a cross above the 50 level means the bullish sentiment is spreading.
[In testing] Extreme values (around -50) of ROC(14) of the same indicator seem to coincide with bottoms in the S&P 500 index in times of high volatility. Conversely, when ROC(14) stays within a narrow range (e.g. between -20 and +20) it indicates a trending market.
CBOE OPTIONS TOTAL PUT/CALL RATIO
The CBOE options Put/Call ratio is an indicator of market sentiment. When its moving average moves above one, it signifies a diffused and generalized expectation (or fear) of lower prices. Extreme values may indicate market turning points. When the 20-day /EMA crosses above 1, it's bearish. When it crosses below 1, it's bullish.
McCLENNAN OSCILLATOR
Any discussion of market breadth would not be complete without a reference to the McClennan Oscillator.
=============================================================
Rules:
1. A/D line: recent (< 1 month) divergence -1, otherwise +1
2. NYSI: -1 when < 0, +1 when > 0
3. NYHL-EMA10: -1 when recent divergence, -1 when < 0, +1 when > 0
4. NYA200R-EMA20: -1 when <50, +1 when > 50
5. NYA200R-ROC14: +1 when within [-20, 20], -1 when outside of [-20, 20]
6. CPC-20EMA: +1 when < 1, -1 when > 1
Interpreting the score:
N < 1 means all cash
1 or 2 means 33% in
2 or 3 means 66% in
4 or above means 100% in
