SPY - Standard deviation levels, A/D+BB, and ADX.
So, wanted to keep this simple and short. Below (or above I cannot tell right now) I have plotted the following:
1. SPY and its standard deviation levels using data from a year ago to present.
2. Accumulation/Distribution + Bollinger Bands using A/D data.
3. ADX, and an average reversal line price where SPY tends to reverse.
I plotted the Bollinger bands within the A/D with 3 standard deviations from mean, instead of 2 to block out some of the noise. I found that with 2 it was a little too faulty, and the A/D line visit to its 2nd deviation was pretty common. The use of 3 std dev allowed for a better approach to find the local minimum and maximum. Within the A/D + Bollinger, The reversals for SPY here are found on the second bounce of the A/D line. The A/D line visits either the upper or lower band, but instead of immediately reversing, there's a slight delay. The second visit or the second attempt to go "lower" or "higher" for the A/D line, is typically when the reversal happens.
Knowing the extrema points for accumulation/distribution I wanted to determine the strength of the movements which is why I chose ADX. I grabbed some reversal points of SPY, and made an average of which I plotted as a line on ADX to determine if the current ADX number was close to its previous average reversal point.
If the ADX was above its reversal point, showing some weakness, and the A/D line visits either band, SPY tends to reverse.
I just found this super interesting and wanted to share :) I will for sure go more in depth next time, and make some more changes and calculations. This was just a simple approach using Standard deviations, and some cool indicators. Thank you for reading!
1. SPY and its standard deviation levels using data from a year ago to present.
2. Accumulation/Distribution + Bollinger Bands using A/D data.
3. ADX, and an average reversal line price where SPY tends to reverse.
I plotted the Bollinger bands within the A/D with 3 standard deviations from mean, instead of 2 to block out some of the noise. I found that with 2 it was a little too faulty, and the A/D line visit to its 2nd deviation was pretty common. The use of 3 std dev allowed for a better approach to find the local minimum and maximum. Within the A/D + Bollinger, The reversals for SPY here are found on the second bounce of the A/D line. The A/D line visits either the upper or lower band, but instead of immediately reversing, there's a slight delay. The second visit or the second attempt to go "lower" or "higher" for the A/D line, is typically when the reversal happens.
Knowing the extrema points for accumulation/distribution I wanted to determine the strength of the movements which is why I chose ADX. I grabbed some reversal points of SPY, and made an average of which I plotted as a line on ADX to determine if the current ADX number was close to its previous average reversal point.
If the ADX was above its reversal point, showing some weakness, and the A/D line visits either band, SPY tends to reverse.
I just found this super interesting and wanted to share :) I will for sure go more in depth next time, and make some more changes and calculations. This was just a simple approach using Standard deviations, and some cool indicators. Thank you for reading!
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