There are many tools for swing traders. Position traders have not as much, perhaps because they live in the fringe zone between fundamental analysis and trend following.
In order to bridge this gap between fundamental analysis and technical analysis on large timeframes, we decided to work on building a market indicator that assesses its risk and quantifies it on a single dimension number.
The challenge is to consider as input different assets, that individually are themselves often market driving forces, and collectively, more often than not, are sufficient to determine the market status quo.
We came up with DXY , US10Y , HYG and WTI. The latter, the bigger the better; the former, vice versa.
Each asset is evaluated against its recent max/min range, percentually. The positive ones add up and vice versa.
This is still ongoing work. the math and code are simple. the heart of the matter is selecting the proper assets and processing them even better.
Thank you.
เอกสารเผยแพร่
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There are many tools for swing traders. Position traders have not as much, perhaps because they live in the fringe zone between fundamental analysis and trend following. In order to bridge this gap between fundamental analysis and technical analysis on large timeframes, we decided to work on building a market indicator that assesses its risk and quantifies it on a single dimension number. The challenge is to consider as input different assets, that individually are themselves often market driving forces, and collectively, more often than not, are sufficient to determine the market status quo.
We came up with DXY, US10Y, HYG and WTI. The latter, the bigger the better; the former, vice versa. Each asset is evaluated against its recent max/min range, percentually. The positive ones add up and vice versa. This is still ongoing work. the math and code are simple. the heart of the matter is selecting the proper assets and processing them even better.
We have updated the background, depicting its components in a color map. It goes as follows.
The background bars are as follows, from top to bottom; wti, hyg, us10y, dxy. As expected the red color means bad; yellow, neutral; green, good. The upper two (wti, hyg), are green when in the highest; the bottom two (us10y, dxy), the contrary.
Some interpretations, feel free to have your own.
Growth is signaled by (from top to bottom) red, green, green, red; i.e, low oil, high hyg, low us10y, strong usd. Recession is red, red, red, green; i.e, low oil, low hyg, high us10y, weak usd. Inflation is green, green; i.e, high oil, high hyg. the remainder are colored accordingly to how the fed is reacting. Stagflation is green, red; i.e, high oil, low hyg. the remainder are as stated above.
Yes, it is too simplistic, hopefully enough for a quick look.
Thank you.
เอกสารเผยแพร่
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added labels on the right side of the bottom chart to identify each indicator component in each row.
เอกสารเผยแพร่
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We've added a new curve (in white) that represents a gauge for BTC price move strength. This is based on the premise that higher volume drives prices further (up or down). Thus, this additional curve considers
marketcap variation of main stablecoins,
recent volume changes (whether volume is rising or falling), and
relative position of current volume according to extremes (min, max) of a given horizon (last 200 candles).
We've removed WMA curve of market risk indicator (which remain unchanged) in order not to visually polute the chart. An interesting interpretation is when you have
BTC volume based potential strength (white line) at the top, and
prices not yet moving.
That suggests an intensive move in the near future. Best!
เอกสารเผยแพร่
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dear fellows,
in this update we introduce 2 news plots 1. rate of change of GDP (in white) 2. rate of change of CPI (in orange) both measured quarter over quarter.
as we're not interested specifically in the amplitude of the rate of change, we cap them between [-100, 100], to cope with the existing y axis scale.
as it is a quarter over quarter measure, it only makes sense in 3M chart timeperiod. in any other timeperiod, these plots do not make any sense whatsoever. thus, we invite the users to disable them in case their current timeframe is not quarterly, or vice versa. we are sorry for this inconvenience.
it thus offer good insights, though. the interpretation is as follows. 1. both plots positive, reflation 2. white negative, orange positive, stagflation 3, both negative, deflation 4. white positive, orange negative, goldilocks.
we plan to expand this session in more and better clarification. this work is not original. it is based in existing publicly available knowledge on macro economic categorization.
Hello and thanks for an interesting indicator. If I understand correctly - Does this makes sense to exchange BTC to SPX for example and have a closer reference for stock market than crypto, with all other params unchanged?
greenfield_br
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@vininull, hi there, vinibull. thanks for yet another comment. although possible, i would not suggest you that. the set of securities was chosen because they map the overall money flow. do you know when you look outside the window to check on the weather? this is your window. SPX represents a market way bigger than BTC. however, you point is valid. a closer look in BTC is not depicted here, thus a modified version of this indicator would make sense. that would imply another set of securities, though. also, i'm not mature enough to synthesize that for BTC. thank you.
@Fire01, you're welcome. if you have any difficulty in interpreting it, let us know, please. we'd be glad to help. suggestions and critics are equally welcome. in the markets, one never knows enough. best and success!
Fire01
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@greenfield_br, thank you :) I actually went ahead to overlay this on my main chart (right now without the lines), I really think this can be a helpful tool to assess general sentiment. I used to manually view the 10y yield chart and the dxy chart manually every day, with this I don't necessarily have to do that all the time, because it's right there. I know too little about the correlation of btc with hyg and wti to make use of those two, especially wti I'm really not sure, but maybe I just know too little about it. Another thing that bitcoin seems closely related to (especially these days) is the Nasdaq, and in that context also the NDTH, which shows how many stocks within the Nasdaq 100 are above their 200d moving average, and so are trending up or trending down (the higher the value, the more stocks are above their 200d MA, which indicates a general bullish optimistic environment). But that's just some thoughts, this is really useful!! I have one question: what exactly is needed for a green or red or yellow bar, is it a specific moving average that the value crosses? You provided an explanation in the description, but I didn't fully understand it. Overall - great work!!
greenfield_br
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@Fire01, thank you. take the last 200 candles of any of these components. the max (top value within this range) equals 100%. the min (bottom value within this range) equals 0%. whenever the current value is bellow 34% it is red, above 66% it is green. in between, yellow. hypothetical example. wti in the last 200 candles had a max of 120 usd, and a minimum of 60 usd. currently it is at 100 usd. what color would it be? 120 - 60 = 60. 100 - 60 = 40. 40 / 60 = 0.666% thius it is above 66%, so it is green. in case wti falls 1 usd, to 65, it'll become yellow. i chose this components (wti, hyg, us10y, dxy) not because of their correlation, but rather for their causation. what's the difference? on summer, people eat more icecream, and there is more flood. are they correlated? yes. which cause which? none. the cause is the summer itself. so, i agree that nasdaq composite is currently correlated with bitcoin, but it does nto cause it. i believe (believe) that the aforementioned factors allows for positioning the financial environment in the axis inflation/deflation and growth/recession. thus, they are (sort of) gauges for the macro economic environment. in this sense, green wti might (might) point to inflation, while green hyg to growth or high liquidity (emulated growth), and vice versa. the other two i predict you know them well enough. i hope i have clarified enough, if not, kindly insist. it is worthless to publish anything incomprehensible. best and success!