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Steve/
(This was supposed to go out last night, but the system was down. It
may - or may not - be of interest to others.)
Are you sure you want to know? It is not a simple article to
summarise. "Stochastic Momentum" by William Blau. SMI = Stochastic
Momentum Index, given symbolically as SMI(q,r,s). q is the number of
lookback periods; r and s aare the number of days of exponential
smoothing. Basically, the SMI plots the close relative to the mid-point
between the highest high and the lowest low. Numerator and denominator
both have double exponential smoothing. Blau claims very little lag for
the indicator.
SMI(13,25,2)
100*(mov(mov(C-(0.5*(hhv(H,13)+llv(L,13))),25,E),2,E)/
(0.5*mov(mov(hhv(H,13)-llv(L,13),25,E),2,E)))
Updating this for MS v.6.5:
q:=Input("Lookback Periods?",1,1000,13);
r:=Input("First EMA Periods?",1,100,25);
sm:=Input("Second EMA Periods?",1,100,2);
100*(mov(mov(C-(0.5*(hhv(H,q)+llv(L,q))),r,E),sm,E)/
(0.5*mov(mov(hhv(H,q)-llv(L,q),r,E),sm,E)))
SMI(13,25,2) "The basic configuration of the stochastic momentum index
is ... for a q=13-day lookback with EMA smoothings of 25 and two days
respectively. The indicator maps into a corresponding range of from
-100 to =100 on its scale. Prices are considered to be at "high" levels
when the indicator is above its threshold overbought line (here set at
+40). Prices are said to be at "low" levels when the indicator is below
its threshold oversold line (here set at -40). The signal line ... is
the EMA of SMI(q,r,s). It is normally in the range of three to 12
bars. When the SMI is above its signal line, a price uptrend is
indicated; a downtrend is defined when the SMI is below its signal
line."
SMI(20,20,1) "The stochastic momentum index now appears to trend as
prices trend." ... "The slow stochastic may now be used as an entry (or
exit) vehicle for trading with the stochastic momentum index defining
the trend of prices."
SMI(20,60,1) "Note the smoothness of the SMI due to increased smoothing
[of] an EMA of 60 days with essentially very little lag introduction of
the major turning points."
SMI(2,300,1) "Comparison with the price chart ... reveals it to be an
excellent stand-in for price".
SMI(2,20,20) "The curve is observed to be timely, low lag, with access
to major turning points in prices. The overbought and oversold
thresholds here are set at plus and minus 20, respectively. Generally,
a buy is indicated for the SMI crossing above its signal line; a sell is
indicated for the SMI crossing from above to below its signal line".
"The one-day stochastic is sensitive to the location of the close
relative to the high and low of the day. This characteristic is useful
as a sentiment, or trend identification, indicator."
SMI(1,100,20) "The one-bar stochastic ... gives more of a sense of the
overall direction of the market. Often, the one-bar stochastic may be
used as a direct trading vehicle signaling major turning points on a
smooth and timely basis."
SMI(1,40,20) "A TSI [True Strength Index] (close,40,20) curve is
included for comparison. The TSI curve tracks the close-to-close prices
and is greatly affected by the gap opening. The one-bar stochastic is
unaffected by the gap opening continuing to rise from one day to the
next."
There were several comparisons of the SMI with the True Strength Index
(don't ask) which Blau had introduced a couple of years earlier.
Now aren't you sorry you asked? I'll pass on the moose: we have
politicians like that.
Harvey Pearce, Victoria, B.C., Canada
=====================================
Steve Karnish wrote:
>
> List,
>
> I picked up this indicator and have been working it for the last
> month. Maybe it came from support at Equis (don't know for
> sure). Anyway, the "SMI" was discussed in an article in January
> 1993's TASC. Can anyone tell me the name of the indicator (for
> ten points) and the concept behind it (bonus ten points). First
> one to identify the answers wins a stay at my mother-in-laws:
> "Rolling Hills Bed and Breakfast" and when you get here
> (somewhere in northern Idaho), you get to pet a moose (but be
> careful...they're the postal workers of the animal kingdom).
> Attached is the SMI (13,25,2) and December Silver. This is
> really bugging me!
>
> Steve Karnish
> CCT
>
> ------------------------------------------------------------------------
>
> Name: DecSilSMI.gif
> DecSilSMI.gif Type: GIF Image (image/gif)
> Encoding: base64
> Description: DecSilSMI (GIF Image)
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