Accumulation Swing Index (ASI) ASI was created by Wales Wilder as an ordinary fluctuations indicator that gets signals from previous maximums and minimums of price. Once, Wilder said: "Somewhere amidst the maze of Open, High, Low and Close prices is a phantom line that is the real market." What helps us reveal this phantom line is the cumulation index. In his book "New Concepts in Technical Trading Systems", Wilder describes the indicator this way: "When the Index is plotted on the same chart as the daily bar chart, trend lines drawn on the ASI can be compared to trend lines drawn on the bar chart. For those who know how to draw meaningful trend lines, the ASI can be a good tool to confirm trend-line breakouts. Often erroneous breaking of trend lines drawn on bar charts will not be confirmed by the trend lines drawn on the ASI. Since the ASI is heavily weighted in favor of the close price, a quick run up or down during a day's trading does not adversely affect the index." With the ASI attempting to show the "real market," it closely resembles actual prices. This allows usage of classic support/resistance analysis on the ASI. Standart analysis involves looking for breakouts, new highs and lows, and divergences. Wilder points out the following characteristics of ASI: * It gives quantitation parameters of price changing; * It shows the turning points of short-term changing; * It gives a possibility to understand the real power and trend of the market.
Calculation: SI(i) = 50*(CLOSE(i-1) - CLOSE(i) + 0,5*(CLOSE(i-1) - OPEN(i-1)) + 0,25*(CLOSE(i) -
OPEN(i)) / R)*(K / T)ASI(i) = SI(i-1) + SI(i) Where: SI (i) — current value of Swing Index technical indicator; SI (i - 1) — stands for the value of Swing Index on the previous bar; CLOSE (i) — current close price; CLOSE (i - 1) — previous close price; OPEN (i) — current open price; OPEN (i - 1) — previous open price; R — the parameter we get from a complicated formula based on the ratio between current close price and previous maximum and minimum; K — the greatest of two values: (HIGH (i - 1) - CLOSE (i)) and (LOW (i - 1) - CLOSE (i)); T — the maximum price changing during trade session; ASI (i) — the current value of Accumulation Swing Index. Accumulative Swing Index And The McClellan Oscillator : The accumulation swing index (ASI) is a variation of Welles Wilder's swing index. It plots a running total of the swing index value of each bar. The swing index is a value from 0 to 100 for an up bar and 0 to -100 for a down bar. The swing index is calculated by using the current bar's open, high, low and close, as well as the previous bar's open and close. The swing index is a popular tool in the futures market. The accumulative swing index is used to gain a better long-term picture than using the plain swing index, which uses data from only two bars. If the long-term trend is up, the accumulative swing index is a positive value. Conversely, if the long-term trend is down, the accumulative swing index is a negative value. If the long-term trend is sideways (non-trending), the accumulative swing index fluctuates between positive and negative values. This indicator is used to analyze futures but can be applied to stocks as well. ASI will give the technician numerical price swings that are value quantified, and it will show short-term trend turnarounds. Metastock explains it best: "A breakout is indicated when the accumulative swing index exceeds its value on the day when a previous significant high swing point was made. A downside breakout is indicated when the value of the accumulative swing index drops below its value on a day when a previous significant low swing point was made." You can confirm trendline breakouts by comparing trendlines on the ASI to trendlines on the price chart. A false breakout is indicated when a trendline drawn on the price chart is penetrated but a similar trendline drawn on the accumulative swing index is not penetrated.
Chart Created with Tradestation This 2002 chart of Apple Computer (AAPL) shows a couple of trendlines which confirm the short-term trend witnessed in May and the horizontal pattern that has developed over the summer and early fall. The ASI in this chart indicates no buy signal, yet each and every day the sellers of this stock find buyers. This indicator can be used on occasion to confirm a belief in a trend swing. McClellan Oscillator : The McClellan Oscillator, developed by Sherman and Marian McClellan in the late 1960s, calculates the difference between two exponential moving averages by using the advances and declines from the same day period. Now, this may be the most important part to understand: the two moving averages are always 19 and 39 time periods and represent 10% and 5% trend values, respectively. Professional charting software programs like Tradestation and others use 19 and 39-day periods as the default periods, but many chartists will experiment with other periods in an attempt to fine tune their studies. If you do use the 19/39 model, the McClellan is a good short-term indicator, anticipating positive and negative changes in the advance/decline stats for better market timing. The McClellan Oscillator uses averages and differences based on this data to gauge market breadth. To plot the McClellan Oscillator accurately, the chart must contain both the advancing issues and the declining issues, and the inputs must specify the correct data number for each. Because the McClellan Oscillator uses exponential averages, the numeric value of the McClellan Oscillator will depend on the data available in the chart. If a stock market index is rallying but
more issues are declining than advancing, then the rally is narrow and much of the stock market is not participating. Similar to the moving average convergence/divergence, the McClellan Oscillator is a momentum indicator. When the short-term average moves above the long-term average, a positive value is recorded. As with most oscillators, the McClellan Oscillator shows an overbought issue when the indicator measures in the positive 70 to 100 range, and it shows an oversold issue in the minus 70 to 100 range. Buy signals are indicated when the oscillator advances from oversold levels to positive levels, and, conversely, sell signals are indicated by declines from overbought to negative territory. A rising trendline of troughs and peaks would be a positive sign to the trader while falling tops and bottoms would bring out the sellers.
Chart Created with Tradestation In the 2002 chart of Exxon Mobil (XOM) you can see at the bottom of the chart that the plot is 81.19, indicating a sell signal for the issue. These indicators serve as confirmation indicators to those of us who need to double check our findings on a regular basis. Remember, it's your money - invest it wisely.