Thursday, October 11, 2007

The Swing Indicator - Part 2

The Swing Indicator

We here have 3 adaptive Swing indicators applied to QQQQ 5 mins, declined in 3 different lengths or Time Frame Multipliers.
The shortest Swing is the white line, calculated over 128 bars. The second one is the yellow line, which with a TF multiplier of 2 calculates swings over 256 bars. The third one is the green line with a TF multiplier of 3.

The Swing indicator also has a Search Depth parameter. In most cases, the default setting (0) will suffice. However, in certain circumstances like a strong bull run, the indicator will obviously 'keep it simple' and bring about a straight line. The user may want to search longer for less obvious waves with a Search Depth parameter set to 1. The plot colour is then a little darker.

Since the indicator focuses on a fixed number of bars, the oldest leg is always incomplete. A future version may be implemented to draw all swings since bar 1, or give the user more flexibility in choosing the number of bars. It is not a technical difficulty, but rather a speed compromise which led to the current design. The Swing indicator indeed uses a Genetic Algorithm to detect pivot points, and can sometimes be computing intensive particularly on low time frames if a number of charts are open simultaneously.

An additional indicator can be added to the chart to retrieve pivot points and calculate Fib retracement and expansions automatically when swing legs show the right characteristics. Please note that communication between indicators, in this particular instance, the swing indicator writing pivot points in shared memory later retrieved by the Fib calculation. The same principle can be applied outside TradeStation, i.e. pivot information can be used in a VC++ program via the API.
More details on the API will be posted soon on a separate site. Contact me for details.

Market Outlook RUT for Oct 11th '07

Dominant TF: Weekly and Daily
Swings: UP-UP-DN
Market direction: Up until...

Note that SPY is the leading symbol in our selection of 3 indices.

60mins: neutral to mildly up.

RUT could just as well break this 843 resistance level or hover a little longer and remain in the narrow 838-845 range. The pivot level has also turned to resistance level indicating more difficulty going higher.
Significance levelis still low, so one should rather follow the daily chart for direction, and look at lower time frames for entry/exit points.

Daily: Mildly UP.
AdStoK is still bullish while quite overbought. It should try going higher until the white line shows some weakness and lines cross (very often indicating a decision point).
Current resistance level at 843 is fairly strong then 860 and ultimately 875.
The gradient of the AdStoK Green Line announces a coming crossover within a couple of days. We may then see some slowing down. Such gradient upon crossing should provide interesting information then, particularly about a possible level breakout or not.

Weekly: UP until...

Entropy and AdStoK now show more clearly the way up to 851, 860 then maybe 875 over the next couple of weeks. The Swing indicator is down again, indicating we are very close to a key turning point.