oscillator on $ADD

[kathesig]

Hi, wondering if I can get help creating an oscillator given in the book MacMillan on Options. Does it already exist or if not could someone show me how to do it; it's a simple thing but beyond me! Thanks in advance

here's the instruction from MacMillan:

1. Subtract NYSE declines from advances = net advances [this info is on eSignal's $ADD ]
2. Multiply yesterday's exponential moving average by 0.9, and add it to 0.1 times today's net advances.

Stated as a formula, the daily oscillator value is

M1 = 0.9 * M0 + 0.1 * (Advances - Declines)
where M0 = yesterday's oscillator value
Advances = no. of advancers today
Declines = no. of declines today

For example, if the oscillator closed with a value of 100 yesterday, and today there were 1,200 advances and 900 declines, then the new oscillator value wd be 120:

M1 = 0.9 * 100 + 0.1 * (1200 - 900) = 120

because M0 = 100; advances = 1200; declines = 900.

We could change the mixture by using 80 percent and 20 percent or 75 percent and 25 percent and so forth.

also it would be useful to see intraday as well.

The oscillator, as just defined, generally ranges between about +200 and -200. These are considered to be the "normal" values. Whenever the oscillator exceeds that range, however, you should take notice, for the market has become overbought or oversold.

[checkraise]

Hi kathesig,

THIS PAGE explains how to convert the percent moving average that McMillan uses to its equivalent EMA.

So all you need to do is put a 19-period EMA study on $ADD to get his 10% MA. If you prefer the EMA in a separate bottom oscillator pane, you could easily create it using the EFS Formula Wizard by making the EMA a non-price study.

FWIW, as you will see, this EMA of the $ADD oscillator really does not respect the -200 to +200 range. I know McMillan uses a "stocks only" advance-decline oscillaor; perhaps the EMA on that one is better bounded by that range.