Regime-Aware Reversals with Hurst, ADX, and Regression Scores

Summary

This article proposes using a dashboard of the Hurst exponent, ADX, and a linear-regression score to contextualize Smart Money Concepts and ICT price-action setups. Hurst is calculated from log returns with rescaled range analysis: readings above 0.55 are treated as persistent, readings below 0.45 as mean reverting, and values near 0.50 as lacking directional bias. ADX is used to assess trend strength rather than direction, with low readings presented as weak conditions and high readings as potentially climactic.

The regression score combines slope direction with fit quality, assigning extreme positive or negative readings to clean, directional moves when R² is sufficiently high. The article treats these extremes as warnings to assess possible exhaustion or continuation in the context of higher-timeframe zones, not as standalone entries. It gives interpretive thresholds and trade examples, but no backtest, sample definition, or statistical validation of the suggested reversals. Its assertions about institutional activity and imminent turning points should therefore be treated as hypotheses requiring independent testing.

Key ideas

• The framework combines Hurst, ADX, and regression fit to classify market conditions around price-action setups.
• Hurst readings above 0.55 are interpreted as persistent, readings below 0.45 as mean reverting, and values near 0.50 as directionally inconclusive.
• ADX is presented as a measure of trend strength, not trend direction.
• Extreme regression scores require both a strong slope and a sufficiently high R², and are framed as context rather than entry triggers.
• The article provides no backtest or validation showing that the proposed reversal interpretations predict returns.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.