The NYSE Summation Index: A Single Chart for Determining Whether to Be Invested or Not

The NYSE McClellan Advance/Decline Summation Index has proven quite effective in determining when to be invested or not. Presented in two halves (a Top and Bottom Half), the Summation Index Chart is accessible from the Members Page and from the Home Page.

The Top Half of the chart shows the CCI ranging from above +100 to below -100. When the CCI crosses below +100 from above, a sell signal is generated; when it crosses -100 from below, a buy signal is generated. Beneath the CCI chart is the NYSE Summation Index on which the CCI is based.

The Bottom Half of the chart shows the MACD of the NYSE Summation Index which is useful for observing divergence, often a prelude to a signal change; and shows the SPX (Daily)--an S&P 500 Exchange Traded Fund--with the signals from the top of the chart superimposed as red (sell) and blue (buy) arrows. From the Red Arrow in June 2008 to the Blue Arrow near the end of 2008 reflects a 500+ point decline in the SPX. From the end of April 2009 buy signal through the end of 2009 reflects a 300+ point rise in the SPX.

Note that Whipsaws often occur; for example, from the bottom half of the chart, the April 2008 Buy and June 2008 Sell; and also, the December 2008 Buy/February 2009 Sell/April 2009 Buy. However, such whipsaws tend to result in only small losses or small gains.

There is one caveat respecting use of these buy and sell signals: when a signal occurs, one should stay invested in the stocks and funds held until their performance suffers, on an equity-by-equity basis.