Broad Market Sentiment & Market Mechanics.
Indicator Visual Scheme:
Normalized Oscillator. Oscillating between 1 and -1 (which represent +100% and -100%)
Market Tension measures the tension generated by the directional probability of strong market momentum in the near future. The prices of securities in a market are directly effected by tension released into their respective markets.
Abstract Root Concept:
When the markets begins to trend they build up a kind of tension within the stocks that make up that market. High tension implies that large amount of counter momentum can be generated from only a small group of stocks reverting to their mean. It is important to note how events play out when a market encounter different levels of tension.
Example 1) NYSE Tension cycling between building and releasing:
Tension releasing occurs any time tension moves back towards zero. Example 1 shows tension cycling between positive and negative tension. When NYSE directional tension is being released into the market it has a strong effect on respective issues (In this case the SPY). Note in this example that the index responded very favorably to tension cycles as well as how quickly the market built counter tension.
Example 2) Releasing NYSE tension having a muted effect on pricing.
A market with tension is a market with the power to move prices, and observing what a market does with power is simultaneously observing a market’s unspoken objectives. In example 2 you can see prices were resilient against the pull from the negative NYSE tension releasing. It is important to note that even muted tension market can produce profitable trading opportunities. While at the same time, one ear-marks of a strong trend is the scarcity of opportunities to enter with trend.
Example 3) Low Tension correlating Small Price Ranges:
Conflict is a pillar price volatility while vacancy will churn stops. In example 3 there is a day where tension has a very near zero range and the range price moved was low. Extreme tension either generates strong trends or strong ranges, while a lack of tension tends to cause price to churn. This strongly implies that tension is a good measurement for market volatility.