{"id":49948,"date":"2016-12-22T12:19:08","date_gmt":"2016-12-22T17:19:08","guid":{"rendered":"http:\/\/thedisciplinedinvestor.com\/blog\/?p=49948"},"modified":"2016-12-23T04:20:26","modified_gmt":"2016-12-23T09:20:26","slug":"a-longer-term-look-at-the-spearman-indicator","status":"publish","type":"post","link":"https:\/\/thedisciplinedinvestor.com\/blog\/2016\/12\/22\/a-longer-term-look-at-the-spearman-indicator\/","title":{"rendered":"A Longer-Term Look at the Spearman Indicator"},"content":{"rendered":"[et_pb_section admin_label=”section”][et_pb_row admin_label=”row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]\n

We have written in the past about the Spearman Indicator<\/a><\/strong> and how it is a decent tool for over-bought and over-sold signals. We often use this as a secondary measure to confirm the potential for a change of trend.<\/p>\n

For the most part, the best use of this is for severe oversold condition within a security or market that signals the extreme exhaustion levels of selling. In fact, over longer-time frames it has done a pretty good job at calling some important bottoms. On the other hand, it is not as good at calling tops – similar to most trend oscillators.<\/p>\n

Just as a refresher, The Spearman Indicator, also known as the Spearman Coefficient, at the bottom of the chart is derived from an analysis of the correlation between an actual price series and a sorted list of the same series.  The result is a comparison of the volatility of a security with an efficient price trend.  A breakdown in the correlation of price changes will result in a reversal of the oscillator, signaling a trading opportunity.  A value of -80 implies persistent negative trading.  When this reverses upward, the correlation is breaking down, signaling a chance in the underlying directional bias.  When the oscillator crosses above -80 that may be interpreted as a buy signal.  When it crosses below +80, that\u2018s a sell signal.<\/p>\n

For this monthly time-frame we decided to move the outer boundaries to +90 and -90 to see where those signals may be presenting the greatest opportunities. Also, crossing the zero-line can often be interpreted as a confirmation (or break) of the trend change after it break above or below the outer boundaries.<\/p>\n

The S&P 500 Index<\/strong><\/p>\n

\"\"<\/p>\n

(Spearman indicator in light blue, 3 period SMA in red)<\/em><\/p>\n

#1 and #5 – Signals bottoms below the -90 that crossed above and then rallied from oversold levels<\/p>\n

#2 – Signal crossed below and through the zero line  and the S&P 500 changed to a downtrend for a very short time before a quick turn<\/p>\n

#3 – Crossing above the zero line was indication that the downtrend was probably broken<\/p>\n

#4 – Another cross above and then below the +90 with a continuation down to -90<\/p>\n

#5 – Severe oversold condition that prompted buying into a new uptrend<\/p>\n

#6 – Two tops that could not be sustained showed that an overbought condition signal was evident. Both downtrends interrupted by crossed below and then above the zero line<\/p>\n

Current Trend\/Signal – At the close of the month on 9\/30\/2106 the Spearman moved above +90 then crossed below. However the slope of the Spearman is not necessarily indicating a change of trend at this time. In fact, the Spearman is still above the SMA and until that cross is seen, the current trend is still confirmed.<\/strong><\/p>\n[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]\n","protected":false},"excerpt":{"rendered":"

We have written in the past about the Spearman Indicator and how it is a decent tool for over-bought and over-sold signals. We often use this as a secondary measure to confirm the potential for a change of trend. For the most part, the best use of this is for severe oversold condition within a […]<\/p>\n","protected":false},"author":1,"featured_media":49952,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"on","_et_pb_old_content":"We have written in the past about the Spearman Indicator<\/a><\/strong> and how it is a decent tool for over-bought and over-sold signals. We often use this as a secondary measure to confirm the potential for a change of trend.\r\n\r\nFor the most part, the best use of this is for severe oversold condition within a security or market that signals the extreme exhaustion levels of selling. In fact, over longer-time frames it has done a pretty good job at calling some important bottoms. On the other hand, it is not as good at calling tops - similar to most trend oscillators.\r\n\r\nJust as a refresher, The Spearman Indicator, also known as the Spearman Coefficient, at the bottom of the chart is derived from an analysis of the correlation between an actual price series and a sorted list of the same series.\u00c2\u00a0 The result is a comparison of the volatility of a security with an efficient price trend.\u00c2\u00a0 A breakdown in the correlation of price changes will result in a reversal of the oscillator, signaling a trading opportunity.\u00c2\u00a0 A value of -80 implies persistent negative trading.\u00c2\u00a0 When this reverses upward, the correlation is breaking down, signaling a chance in the underlying directional bias.\u00c2\u00a0 When the oscillator crosses above -80 that may be interpreted as a buy signal.\u00c2\u00a0 When it crosses below +80, that\u201d\u2122s a sell signal.\r\n\r\nFor this monthly time-frame we decided to move the outer boundaries to +90 and -90 to see where those signals may be presenting the greatest opportunities. Also, crossing the zero-line can often be interpreted as a confirmation (or break) of the trend change after it break above or below the outer boundaries.\r\n

The S&P 500 Index<\/strong><\/p>\r\n\"\"\r\n

(Spearman indicator in light blue, 3 period SMA in red)<\/em><\/p>\r\n#1 and #5 - Signals bottoms below the -90 that crossed above and then rallied from oversold levels\r\n\r\n#2 - Signal crossed below and through the zero line\u00c2\u00a0 and the S&P 500 changed to a downtrend for a very short time before a quick turn\r\n\r\n#3 - Crossing above the zero line was indication that the downtrend was probably broken\r\n\r\n#4 - Another cross above and then below the +90 with a continuation down to -90\r\n\r\n#5 - Severe oversold condition that prompted buying into a new uptrend\r\n\r\n#6 - Two tops that could not be sustained showed that an overbought condition signal was evident. Both downtrends interrupted by crossed below and then above the zero line\r\n\r\nCurrent Trend\/Signal - At the close of the month on 9\/30\/2106 the Spearman moved above +90 then crossed below. However the slope of the Spearman is not necessarily indicating a change of trend at this time. In fact, the Spearman is still above the SMA and until that cross is seen, the current trend is still confirmed.<\/strong>","_et_gb_content_width":"","footnotes":""},"categories":[510],"tags":[165],"class_list":["post-49948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blogandupdates","tag-technical-analysis","et-has-post-format-content","et_post_format-et-post-format-standard"],"acf":[],"_links":{"self":[{"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/posts\/49948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/comments?post=49948"}],"version-history":[{"count":0,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/posts\/49948\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/media\/49952"}],"wp:attachment":[{"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/media?parent=49948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/categories?post=49948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedisciplinedinvestor.com\/blog\/wp-json\/wp\/v2\/tags?post=49948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}