ITBM (Intermediate-Term Breadth Momentum Oscillator) Options

[Guru Dudette]

ITBM (Intermediate-Term Breadth Momentum Oscillator)

Crediting Carl Swenlin (of DecisionPoint.com and Traders-Talk.com fame) with the creation of the ITBM and thank him for bringing it to our attention some years ago. Mr. Swenlin developed the ITBM to add a new perspective to interpretation of the McClellan Oscillator.

We have found this to be very sensitive and a much more realistic depiction of the flow of money into or out of stocks. In addition, we have become somewhat adept over the years, at noting certain correlations between the ITBM and imminent market action.

As you can see in the chart above, the highs in the ITBM (the bottom chart) tend to be correlated with the highs in the market (the NYSE chart on top). The lows in the ITBM tend to be correlated with the lows in the market as well.

To calculate the ITBM, Mr. Swenlin advises us to add the daily McClellan Oscillator (Ratio-Adjusted) to the daily 10% exponential average (Ratio-Adjusted), then calculate a 20 day exponential average (0.10 exponent) of the result.

The ITBM is a highly sensitive breadth indicator. Generally, it is bullish if it is above zero and rising. It is generally bearish if it is below zero and falling. Obviously, below zero and rising is better than above zero and falling. A downturn below zero is very bearish, short term. Double or triple bottoms below zero can be quite bullish.