5-Day Momentum Indicator Explained

IB = Intraday Behavior. PM = Price Momentum.

As you recall, the above indicator gave a sell signal on Tuesday.
If you closed your eyes and shorted the market after it rose with
the Fed's announcement, you would have done well.
Fortunately not all calls are associated with major announcements.

Let me elaborate a little on this indicator:

The 5-Day Momentum plots Price Momentum(PM) of the S&P-500
and what I call Intraday Behavior or IB. IB takes into account
where the S&P closes as percent of the range and the amount of
positive range the S&P possesses for the day relative to the
previous close. Additionally the ADV/DEC volume for the NYSE
is included as a part of the calculations.

The important aspects of this indicator are:

It is short-term oriented.

It is very sensitive, meaning that it will call accurately
virtually all tops, but it is not as specific. It generates false
positives signals, meaning that it could point to a top and the
market continues higher. The big advantage is that virtually all
tops will be recognized.

A SELL signal is given when the IB is considerably above the PM
and overbought, usually around the 70% level.

A BUY signal occurs when the IB is below the PM and oversold,
usually around the 30% level.

For Monday (11/5), the Up/Down Indicator is .63, suggesting a
positive bias for the Stock Market.

The Interval = 10 S&P points. Use 14 for increase volatility.