Detecting Extreme Trend Reversals with Recursive Moving Averages
Summary
This indicator estimates trend alignment by recursively applying a selected moving average across multiple levels. It compares the source and each moving-average level pairwise: a fully ordered stack produces the strongest bullish or bearish reading, while mixed ordering indicates less directional structure. Recent strength percentiles set adaptive boundaries for ordinary and extreme conditions, and the plotted average changes color to reflect those bands.
A reversal marker requires both an extreme prior alignment and a price cross of the base moving average: a bearish-to-bullish signal follows fully bearish alignment and an upward cross, while a bullish-to-bearish signal follows fully bullish alignment and a downward cross. The author notes that these events may mark a lasting trend change or only a pullback before the existing trend resumes. Percentile history, moving-average type and length, level count, and alert timing are configurable. Real-time alerts may repaint, so confirmed-bar alerts are the safer setting. The document gives no performance results or testing evidence.
Key ideas
- Recursive moving averages create a stack of progressively smoothed price series.
- Pairwise ordering across the source and moving-average levels measures trend alignment.
- Historical strength percentiles define normal and extreme bullish or bearish zones.
- Reversal markers combine an extreme prior alignment with a price cross of the base average.
- Signals can indicate a lasting change or a temporary pullback, and real-time alerts may repaint.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.