The McClellan Oscillator is a technical analysis indicator for determining the behavior of an overall market, rather than the behavior of a single asset. The Oscillator was developed by Sherman and Marian McClellan for use with the New York Stock Exchange.
The McClellan Oscillator is taken by first subtracting the advancing assets from the declining assets for the entire market to determine the net advances and declines for the market. Two moving averages are taken of this net market behavior, one for a thirty-nine day period and one for a nineteen-day period. The difference between these two moving averages, formed by subtracting the thirty-nine day average from the nineteen day average, forms the McClellan Oscillator.
When the McClellan Oscillator is positive, advances are dominant in the market. When the Oscillator is negative, declines are dominant. Traders take this as a signal of the overall momentum for a market. Additionally, signals in excess of 100 or -100 are signs that a market is either overbought or oversold, respectively. If the Oscillator moves from -100 or below into positive numbers, a buy signal is generated; if the Oscillator moves from 100 or above into negative numbers, a sell signal is generated.