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Here's a summary of how this broad market tool may be used. I'm posting it here to remind myself in the future, and possibly help out others interested in the "top-down" or broad market analysis.
BROAD MARKET INDICATORS IN GENERAL
Market Breadth Indicators use such data as the number of Advancing and Declining issues to develop “indications” of the market momentum. They are used to evaluate the direction of the whole markets, or broad market Indices, such as the NYSE Index or the S&P 500. “A rising tide raises all ships” may be applied to an individual stock, but that’s as far as a broad market indicator is used – to gauge the Market, not any individual stock or even mutual fund. Then, if you expect the market to rise, and your portfolio has a beta of, say, 1.5, you may expect your portfolio to outdo the market by a factor of 1.5. If you expect the market to fall, you may wish to ease on those volatile stocks in your portfolio (a tactical move known “cash is king right now.”)
McCLELLAN OSCILLATOR
The McClennan Oscillator is a broad market indicator showing “oversold”, “overbought” areas and giving us “warning shots” of the market's ascending/descending into these extremes. It also gives BUY and SELL indications, when in crosses the Zero Line upwards or downwards.
Thankfully, the TC2005 plots the McClennan Oscillator in its Indexes watch list. The symbol is T2106. Today, Friday, March 10, 2006, I plotted it together with the NYSE Index, to look for clues as to the market’s whereabouts and direction. As it shows, the market is in the “oversold” territory (the Oscillator near –150), and the T2106 is curving up, which is slightly bullish. Yet, it may remain in, and re-visit in force, the oversold area. In other words, it is not giving us currently any Buy or Sell short-term signals, even though mid-term the market should climb out of the currently moderately oversold condition. It may also climax first, causing some severe pain to the followers of aggressively long strategies.
The McClellan Oscillator is an intermediate-term indicator, but it can also be used for shorter-term timing when it bottoms in oversold territory – lower than ( -100 ). Here are some of its most important properties and indications:
1)When the McClellan Oscillator moves below the Zero Line – a SELL (or BEARISH ) Signal is rendered;
2)When the McClellan Oscillator moves above the Zero Line – a BUY Signal is rendered; however, these are general guidelines, not carved in stone; these rules of thumb do not guarantee to result in profitable trading;
3) Sherman McClennan said that Oscillator readings approaching the negative areas of (– 125) to (– 130) may be a bearish “warning shot.” The subsequent deep negative readings do not have the same “warning shot” implications. They’re the fulfillment of the original “warning shot.”
4) In most cases, it is not the numerical value of the McClennan Oscillator, rather the path of the oscillator that is important.
5) When the Oscillator crosses the zero line and keeps chopping back and forth (oscillating), forming stalactite-like structure on that same side of the zero line – it’s a sign of strength of the direction indicated by the zero-line crossing.
A "typical" McClellan Oscillator pattern series consists of consecutive formation of a Complex Bottom, a Middle Spike, and a Buy Spike. The typical Complex Bottom is a series of oscillations below the Zero Line, while the market is declining. This is followed by a move well above the Zero Line, which begins the formation of the Middle Spike -- a bunch of stalactite-like shapes between the "move above zero" and the "move back below zero." The Middle Spike signals the beginning of an intermediate-term upward move, but it is usually followed by another down move, possibly to lower lows. After the down leg of the Middle Spike has concluded, we can expect a Buy Spike, which as the name implies signals a new up trend in the market. Buy Spikes are normally formed in oversold territory (-80 and below), but rising series of Buy Spikes is also a possibility. While thus-described is a "typical" series of chart formations, they may not appear in the above-specified order . . . or at all. Technical Analysis, after all, is an art form, not a science. 
CALCULATION of the McClennan Oscillator
The exact calculation of the McClellan Oscillator is covered below, but it is basically the result of subtracting a 0.05 exponential average (40-day moving average) of advances minus declines from the 0.10 exponential average (20-day moving average).
5% Index:
((Today's Adv minus Decl - Prior Day's 5% Index) * 0.05) + Prior Day's 5% Index = Today's 5% Index
10% Index:
((Today's Adv minus Decl - Prior Day's 10% Index) * 0.10) + Prior Day's 10% Index = Today's 10% Index
(Note: The first time you begin to calculate an exponential average, you must calculate a simple moving average.)
McClellan Oscillator:
Today's 10% Index - Today's 5% Index = Today's McClellan Oscillator
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