Momentum Oscillators: Objective Selective Effective
 I believe the most useful tools employed by technicians are momentum oscillators. The momentum oscillator measures the velocity of directional price movement. When price moves up, at some point the market is considered to be overbought; when it moves down, at some point the market is considered to be oversold. In either case, a reaction or reversal is imminent. The slope of the momentum oscillator is directly proportional to the velocity of the move. The distance traveled up or down by the momentum oscillator is proportional to the magnitude of the move. The momentum oscillator is usually characterized by a line on a chart drawn in two dimensions. The Y axis (vertical) represents magnitude or distance the indicator moves; the X axis (horizontal) represents time. The momentum oscillator drawn in this manner is characterized by the fact that it moves very rapidly at market turning points and tends to slow down as the market continues the directional move. (All formulas are written for use with MetaStock EOD and MetaStock Pro software).
(Click on the images below to enlarge)
CCT Bollinger Band Oscillator:
((C+2*Std(C,21)-Mov(C,21,S))/(4*(Std(C,21)))*100
 Bollinger Bands were developed by John Bollinger and are envelopes that are plotted at two (2) standard deviation levels above and below a moving average. The CCT Bollinger Band Oscillator reconfigures the classic bands. The new indicator constructs two (2) parallel lines instead of the erratic envelopes. These parallel lines represent a measurement of two (2) standard deviations from the mean and are assigned zero and 100 on the chart. The indicator represents the price as it travels above and below the mean (50%) and outside the two standard deviations (zero and 100). Penetration of the upper or lower band represents overbought and oversold conditions. When using the CCT Bollinger Band Oscillator, "failure swings" and "divergences" can lead to significant reversals.
CCT FibAccordion:
(Mov(C,13,E)-Mov(C,144,E))
 The FibAccordion is the difference between two moving averages that are assigned fibonacci numbers. Try building your own by taking any two moving averages with different fibonacci numbers and subtracting one from another and plotting the results. Use either a simple or exponential average and vary the fibonacci numbers until you build an oscillator that you are comfortable with.
CCT FibCMO:
(CMO(C,3)+CMO(C,5)+CMO(C,8))/3
 The CCT FibCMO is a modification of the Chande Momentum Oscillator (CMO). It is a great timing device for entry. It also works well in reversal systems that keep you in the market at all times.
CCT Kaleidoscope:
LinRegSlope(C,13)+100 * ( Mov( Mov( ROC(C,1,$),34,E),21,E) / Mov( Mov( Abs( ROC(C,1,$)),34,E),21,E))+100 * ( Mov( Mov(C - (.5 * ( HHV(H,13) + LLV(L,13))),21,E),3,E) / (.5*Mov( Mov( HHV(H,13) - LLV(L,13),21,E),3,E)))
 The CCT Kaleidoscope is an interesting combination of three separate momentum oscillators. I've combined the MetaStock LinRegSlope indicator with the Stochastic Momentum Indicator and added the True Strength Index. As always, I have "tweaked" the formula numbers to various fibonacci numbers and assigned various weights to each of the parts. The SMI is a "double-smoothed stochastic" introduced by William Blau. Mr. Blau also has written about the True Strength Index, which in his words is a "cross between a relative strength indicator and a moving average convergence/divergence indicator with many of the desirable properties from each". The combination of the three is a super powerful tool I call the Kaleidoscope.
CCT LinRegOscillator:
(LinearReg(C,13)/Ref(LinearReg(C,13),-13))-1
 This momentum oscillator is an extension of my late 70's work (see CCT Moving Average Oscillator). It simply plots a comparison of two linear regressions. Both the length of the regression and the amount of "lag time" are pegged to significant fibonacci numbers.
CCT MACD Oscillator:
(Mov(C,13,E) - Mov(C,21,E))-(Mov((Mov(C,13,E) - Mov(C,21,E)),5,E))
 Most analysts (including Equis International's) say that the MACD indicator is "the difference between 12-day and 26-day exponential moving averages." I've never been one to run with the crowd (even though I was part of the Merrill Lynch "herd"). The CCT MACD Oscillator substitutes fibonacci numbers, creating an indicator that is smoother than a lot of published versions.
CCT Moving Average Oscillator:
Mov((Mov(C,3,E)-Mov(C,13,E)),3,S)
 My first computer was a Model I Tandy and after I bought it, the first formula I programmed was moving average oscillators. Identify a moving average and compare it to an average lagged "x" amount of days. Rather simple, but certainly powerful.
CCT Standard Error Oscillator:
(C+2*STE(C,8)-Mov(C,3,S))/(4*(STE(C,8)))*100
 During the past year, I have become fascinated with Standard Error Bands. Here's a formula that I use to determine overbought and oversold situations in the index futures' markets.
CCT StoRSI Oscillator:
Mov( ( RSI(8) - LLV( RSI(8) ,8 ) ) / ( ( HHV( RSI(8) ,8) ) - LLV(RSI(8),8) ),3,E) *100
 Roger Altman, William Blau, Stanley Kroll, and Tushar Chande have all improved on J. Welles Wilder's Relative Strength Index. I believe the best of these derivative indicators is the Stochastic RSI. MetaStock offers one version of this indicator on their formula page. This version is just one of many I use. I like substituting the numbers 3, 5, & 8 in this formula.
|
