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NASDAQ Summation Index Hits Resistance

04/17/08 01:19:38 PM
by Arthur Hill

The McClellan Summation Index for the NASDAQ hit resistance, and traders should watch for a moving average crossover to trigger a bearish signal.

Security:   $COMPQ
Position:   Hold

First, let's review. The McClellan Summation Index is a cumulative measure of the McClellan oscillator readings. The McClellan oscillator is the 19-period exponential moving average (EMA) of AD Net% less the 39-day EMA of AD Net%. AD Net% equals advances less declines, divided by total issues. The McClellan oscillator fluctuates above and below the zero line. Positive readings add to the summation index and negative readings subtract from the summation index.

The top window shows the NASDAQ with the 10-day simple moving average (SMA) and the bottom window shows the NASDAQ McClellan Summation Index with a 10-day SMA. Note that the McClellan Summation Index is much smoother than the NASDAQ. The McClellan Summation Index crossed its 10-day SMA nine times since August. In contrast, the NASDAQ crossed its 10-day SMA over 20 times. With half as many crossovers, the summation index provides fewer whipsaws.

FIGURE 1: NASDAQ, DAILY. Note the McClellan summation index is much smoother than the NASDAQ.
Graphic provided by:
The McClellan Summation Index signals are not perfect and there will be whipsaws (losses). However, the moving average crossover signals can augment other indicators and analysis. The summation index is currently meeting resistance from its prior highs around 600. The indicator dipped down in mid-April, but did not cross below its 10-day SMA. With the summation index at resistance, I am watching the index for a potential bearish signal from a crossover.

As long as the summation index remains above its 10-day SMA, the NASDAQ rally could continue with an upside target around 2450. The October trendline and broken support confirm resistance in this area.

Arthur Hill

Arthur Hill is currently editor of, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for and the main contributor to the ChartSchool.

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Date: 04/19/08Rank: 5Comment: 

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