The top chart is from 2009-2017. Note that the area highlighted in yellow was enlarged in the lower chart.
Most of the time the MS goes between either -2000 & +2000 or -3000 & +3000. Occasionally it does reach extreme readings of -4000 & +4000.
As you can see in 2009 & in 2016 the MS did go below -4000 and in 2012-2013 it went between -3000 & +3000.
But, starting in 2015 the MS did not get above +500 even while the stock market did trade higher and was making new ATH's.
It is currently at a triple top area at or just under +500.
If the MS cannot get past +500 decisively, then a correction of some sort may be on the horizon.
Also, a chart of stocks above their 200DMA have had lower tops over the last 18 months.
This also confirms the current MS chart.
At the very least, if the MS stalls here as it did the last two times, highlighted in yellow & circled in red in the lower chart, you can see that the market went into a sideways trading pattern,
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| Courtesy of Worden Bros. |
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| Courtesy or Worden Bros. |
By Investopedia
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.
Interpretation
(By StockCharts.com Chart School)
The Summation Index rises when the McClellan Oscillator is positive and falls when the McClellan Oscillator is negative. Extended positive numbers in the McClellan Oscillator cause the Summation Index to trend higher. Conversely, extended negative readings cause the Summation Index to trend lower.
Because of its cumulative nature, the Summation Index is a slower version of the McClellan Oscillator. The index crosses the zero line fewer times, forms divergences less often and produces fewer signals in general. Whereas the McClellan Oscillator can be used for short-term and medium-term timing, the Summation Index is generally used for medium-term and long-term timing.
There are three basic signals. First, the Summation Index generally favors the bulls when positive and the bears when negative. Second, chartists can look for bullish and bearish divergences to anticipate reversals. Third, chartists can identify directional movement to define a bullish or bearish bias.
The Summation Index rises when the McClellan Oscillator is positive and falls when the McClellan Oscillator is negative. Extended positive numbers in the McClellan Oscillator cause the Summation Index to trend higher. Conversely, extended negative readings cause the Summation Index to trend lower.
Because of its cumulative nature, the Summation Index is a slower version of the McClellan Oscillator. The index crosses the zero line fewer times, forms divergences less often and produces fewer signals in general. Whereas the McClellan Oscillator can be used for short-term and medium-term timing, the Summation Index is generally used for medium-term and long-term timing.
There are three basic signals. First, the Summation Index generally favors the bulls when positive and the bears when negative. Second, chartists can look for bullish and bearish divergences to anticipate reversals. Third, chartists can identify directional movement to define a bullish or bearish bias.
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