Inertia is measured on a scale from 0 to 100. Negative inertia is seen if the indicator is below 50. If the indicator is above 50, it is said to have positive inertia. Signs of positive inertia are indicative of a long-term upward trend. Signs of negative inertia illustrate long-term downtrends.

The IMI is calculated like the RSI but uses the relationship between the intraday opening and closing prices to determine whether the day is up or down. When the close is above the open, it is an up day. If the close is below the open it is a down day. White candlesticks signify an up day, black candlesticks used for down days.

As with the RSI, overbought conditions (and lower prices ahead) are indicated when the index rises above 70. Values below 30 indicate a potential oversold situation and higher price ahead. Remember, as with all overbought/oversold indicators, you should first quantify the trendiness of the market before acting on any signals.

The Inverse Fisher Transforms purpose is to alter the probability distribution function (PDF) of indicators.

The PDF of price and indicators do not have normal probability distribution. Turning points should be sharply peaked as a result of altering the PDF of an indicator.

The Fisher transform is expansive; the inverse Fisher transform is compressive. The calculation limits the range from -1 to +1; this probability distribution makes for clear buy and sells signals.

When using the inverse Fisher transform with the RSI, buy when the indicator crosses over -0.5, or crosses over +0.5 (if it has not previously crossed over -0.5). Sell short when it crosses under +0.5, or crosses under -0.5 (if it has not previously crossed under +0.5).

More detailed information on the inverse Fisher transform can be found in the May 2004 issue of Technical Analysis of Stocks and Commodities

(http://www.traders.com).