The current tariff environment is full of sudden moves that could have broad and long-lasting effects. The challenge is that we don’t know what those long-term impacts will be, mainly because it’s unclear how long the tariffs will last or what things will look like if they become permanent. That makes it incredibly hard to plan or make smart decisions right now.
Near-term shocks are preventing us from estimating the longer-term picture. Perhaps an effective way to counterbalance the geopolitical and market news with some objectivity, then, is to look under the stock market’s hood and take a good look at its breadth of movement—specifically, a longer-term summation of advancing vs. declining stocks. One indicator that’s designed specifically to do this, and one you might want to consider, is the McClellan Summation Index.
What Does the McClellan Summation Index Tell You?
Derived from the McClellan Oscillator, the McClellan Summation Index is a long-term market breadth indicator that shows whether more stocks are generally advancing or declining over time.
Think of it as a cumulative McClellan Oscillator of sorts. When the McClellan Oscillator is positive (above zero, meaning more advancers than decliners), the McClellan Summation Index trends upward; when the oscillator is negative (more decliners than advancers), the corresponding summation index trends downward. As you’ll see in Figure 1, uptrend and downtrend are color-coded black and red, respectively, so you distinguish the turns.
Generally, when the summation index is above zero (or +500), it signals bullish momentum (+500 signaling extremely bullish momentum); below zero (or –500), it reflects bearish (or exceedingly bearish) momentum. By smoothing out the short-term noise of the McClellan Oscillator, the summation can help you gauge the underlying strength or weakness of a market trend.
And smoothing out the noise coming out of the current trade war environment is probably something you’ll want to see.
Take a look at a three-year chart of the NYSE McClellan Summation Index paired with the S&P 500.
FIGURE 1. THREE-YEAR CHART OF THE NYSE MCCLELLAN SUMMATION INDEX WITH THE S&P 500. Notice the index turning points as they correspond to the ZigZag lines in the S&P. Chart source: StockCharts.com. For educational purposes.
The NYSE McClellan Summation Index is in negative territory below the zero line, and the S&P is undergoing a steep drop. The Summation Index shows that declining stocks are far outnumbering advancing stocks, providing a breadth-informed perspective from which to view the broader market’s bearish decline.
While you can wait for the summation index to cross over the zero line (or even above 500), one way to interpret an early bullish signal is to apply a simple moving average (SMA), such as a 20-day SMA (see purple-dotted line).
As you can see in the chart above, there were many crossovers, indicating upturns and downturns. So, how might you avoid getting whipsawed and taking action on a false signal? You have to watch the price action, particularly the swing highs and lows (remember, an uptrend consists of HH + HL, and the reverse is true of a downtrend). This is where the ZigZag line comes in handy.
- The chart illustrates the S&P 500 trending higher from the last quarter of 2022 to the breakdown in March 2025.
- Note how almost all crossovers below the negative line (highlighted by the blue circles) forecasted new highs in the S&P 500.
- The June 2023 crossover was the exception, but the pullback stayed well above the March 2023 low, sustaining its primary uptrend.
- In October 2024, the summation index began falling as the S&P 500 continued making new highs.
- The last SMA crossover preceded a new high, but the S&P finally broke down (see dotted line), leading to where we are now.
At the Close: What Now?
The broader market is trading on tariff-driven headlines, with policy shifts carrying enough weight to reshape the underlying fundamentals. Short-term technicals reflect this uncertainty through heightened volatility, some of which feels nearly unprecedented. In contrast, the longer-term picture—viewed through the lens of the McClellan Summation Index—appears steadier, though still susceptible to noise.
For long-term investors seeking early signs of a shift, watch the Summation Index closely. A bullish crossover above its moving average may be the first clue, but the real confirmation comes from trend behavior. Use tools like the ZigZag indicator to track swing highs and lows—what you want to see are higher highs and higher lows taking shape. Until then, most other market interpretations remain at the mercy of sudden geopolitical shifts—moves that are unpredictable in both timing and duration.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.