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- Ultimate Oscillator
Developed by Larry Williams, the Ultimate Oscillator combines a stock's price action during three different time frames into one bounded oscillator. The three time frames represent short, intermediate, and long term market cycles (7, 14, & 28-period). Note that these time periods all overlap, the 28-period time frame includes both the 14-period time frame and the 7-period time frame. This means that the action of the shortest time frame is included in the calculation three times and has a magnified impact on the results.
It is expressed as a single line plotted on a vertical range valued between 0 and 100, with oversold territory below 30 and overbought territory above 70.
Trading should take place when there is a divergence between price and the Ultimate Oscillator. When the price reaches a new low and is not supported by a new low of the Ultimate Oscillator, a bullish signal is generated, provided the Oscillator falls below thirty during this divergence and the Oscillator then rises above its high during the divergence. According to Williams the subsequent uptrend can be ended should the value of the Ultimate Oscillator rise above seventy or rise above fifty and then fall below forty-five. When the price reaches a new high and is not supported by a new high of the Ultimate Oscillator, a bearish signal is generated, provided that the Oscillator rises above fifty during this divergence and the Oscillator then falls to a new low during the divergence. The subsequent downtrend can be ended should the value of the Ultimate Oscillator rise above sixty-five or fall below thirty.
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- Upside/Downside Ratio
The Upside/Downside Ratio function tries to determine the momentum of the market by calculating the ratio of the volumes of advancing (up) to declining (down) issues on the New York Stock Exchange. This indicator is often smoothed with a moving average to filter out day-to-day fluctuations and display longer term trends.
Values will be greater than 1.0 when more volume is associated with stocks that are advancing (increasing in price) than those declining. Values of less than 1.0 are when greater volume is associated with stocks with falling prices.
This indicator makes a good overbought/oversold indicator. Extremely high values may indicate that the market is becoming overbought with a sell-off occuring in the near future along with a drop in prices. Likewise, extremely low values can indicate that the market is becoming oversold.
Another characteristic to watch for is "mutliple 9-to-1 days" (an Upside/Downside Ratio greater than nine). In his book, Winning on Wall Street, Martin Zweig states, "Every bull market in history, and many good intermediate advances, have been launched with a buying stampede that included one or more 9-to-1 days" Two or more values of 9 or greater within a three month period will typically indicate the beginning a strong bull market.
In general, broad market indicators can be used for trading against broad market indices through options, futures, and mutual funds. They can also be used to increase the effectiveness of more specific signals by adding confirmation or warning of upcoming trends.
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- Upside/Downside Volume
The Upside/Downside Volume indicator illustrates the difference between up (advancing) and down (declining) volume on the New York Stock Exchange.
The Upside-Downside Volume indicator shows the net flow of volume into or out of the market giving short-term buy/sell signals, based on zero line crossovers. Like all such oscillators, the greater the distance from the zero line, the greater the chances of reversal.
The oscillator is very sensitive, upward movements are associated with buying, and downward with selling. Used in combination with the TRIN or other technical indicators, the Upside/Downside Volume indicator can be a very handy trading tool.
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