McClellan Summation Index

DEFINITION of 'McClellan Summation Index'

The McClellan Summation Index is a long-term version of the McClellan Oscillator — which is a market breadth indicator based on stock advances and declines. Interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends.

BREAKING DOWN 'McClellan Summation Index'

The McClellan Summation Index is used in technical analysis and can be used to identify bullish or bearish bias, as well as the strength of the trend. It is a different way of quantifying the movements in the market other than looking at the price levels of the different indices, such as the S&P 500 and the Dow Jones Industrial Average

The index is calculated by adding the current day's McClellan Oscillator to the previous day's Summation Index, making it a cumulative measure of movements. Given that it is based on past prices, it is a lagging indicator. 

Usually, a small number of stocks making large gains characterizes a weakening bull market. This gives the perception that the overall market is healthy, but in reality it isn't, as rising prices are being driven by a small number of stocks. Conversely, when a bear market is still declining, but a smaller amount of stocks are declining, an end to the bear market may be near. The McClellan Oscillator — which the Summation index is based on — is calculated using 19- and 39-day exponential moving averages, which avoids applying large gains and declines of a few stocks to the whole market, thus it indicates the trend itself, as well as the strength of it.

See the index here.