This indicator looks at the momentum numbers and extracts all the useful physical aspects of momentum to give a very clear overview of how the momentum numbers will effect the market each day.
System Intensity: how strongly the numbers will effect markets over the next day.
Signal Intensity: how strongly the current numbers will effect prices right now.
Potential Energy: Level of intensity produced by a reversal of the current numbers.
Energy Conductivity: how effective strong numbers will be at moving prices.
Condition Duration: How many bars the current conditions have been in play.
MassFlowRate: How quickly prices are effected by the current numbers.
When the oscillating wave becomes coiled (compressed), this indicates the market is full of potential energy which will result in larger price swings over the next 1 – 3 days. When the line is uncoiled it implies the market will struggle to make any directional price moves.
Example A) This graph shows how the indicator displays compression.
Example 1) Coiled wave indicates a high level of market energy.
When the market is packed full of energy, that energy can release into the market and drive price to become directional. In example 1 you can see the NYSE had high levels of energy, indicated by a coiled wave. The system intensity is massive at 116% which tells you the market will have aggressive price movements over the next 1 – 3 days. Another important number is how conductive the market is do the energy. Example 1 shows a highly conductive market at 70%. If the conductivity in Example 1 was low ( like around 15% ) then the high level of energy would have a high chance of being burned off instead of getting released.
Example 2) Low energy market with the potential for strong moves over the next day.
In example 2 you can see the line is uncoiled and system intensity is moderately low. The Energy Conductivity is high and this implies that while the NYSE is slow right now but will easily pick up soon because it will be highly conductive to any new energy from momentum numbers.
The Market Physics-O-Meter allows the trader to know when there should be directional trending markets and when there should be slow ranges.