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UPDATA, SECTOR ROTATION MODEL (SRM) INDICATOR

This tip is based on Giorgos Siligardos’ article in this issue, “Applying The Sector Rotation Model.”

In the article, Siligardos introduces a macro perspective in technical trading by creating an oscillator that rises and falls with the relative dominance between bullish and bearish market sentiment. See Figure 13.

FIGURE 13: UPDATA, SECTOR ROTATION MODEL INDICATOR. This chart shows the 75-period sector rotation model as applied to a daily chart of the S&P 500.

Financial and discretionary sectors are suggested to outperform during bullish times and are used as inputs via their ETFs. The sector ETFs of energy, utilities, and healthcare are suggested to outperform during bearish times and are used as bearish inputs. The subsequent indicator’s extremities are used to pick turning points in the aggregate market (the S&P 500 index).

The Updata code for this indicator has been added to the Updata Library and may be downloaded by clicking the Custom menu and then Indicator Library. Those who cannot access the library due to a firewall may paste the code shown here into the Updata Custom editor and save it.

PARAMETER "XLY Ticker" ˜XLY=SELECT 
PARAMETER "XLF Ticker" ˜XLF=SELECT
PARAMETER "XLE Ticker" ˜XLE=SELECT 
PARAMETER "XLU Ticker" ˜XLU=SELECT 
PARAMETER "XLP Ticker" ˜XLP=SELECT 
PARAMETER "Lookback Period" #PERIOD=75
NAME "SRM[" #PERIOD "]" ""
DISPLAYSTYLE LINE
PLOTSTYLE HISTOGRAM
@BULLELEMENT1=0
@BULLELEMENT2=0
@BEARELEMENT1=0
@BEARELEMENT2=0
@BEARELEMENT3=0
@BULL=0
@BEAR=0
@SECTORROTATIONMODEL=0  
FOR #CURDATE=#PERIOD TO #LASTDATE   
@BULLELEMENT1=-1+˜XLY/HIST(˜XLY,#PERIOD)
@BULLELEMENT2=-1+˜XLF/HIST(˜XLF,#PERIOD)
@BEARELEMENT1=-1+˜XLE/HIST(˜XLE,#PERIOD)
@BEARELEMENT2=-1+˜XLU/HIST(˜XLU,#PERIOD)
@BEARELEMENT3=-1+˜XLP/HIST(˜XLP,#PERIOD)
'AVERAGES
@BULL=(@BULLELEMENT1+@BULLELEMENT2)/2
@BEAR=(@BEARELEMENT1+@BEARELEMENT2+@BEARELEMENT3)/3 
'OSCILLATOR
@SECTORROTATIONMODEL=100*(@BULL-@BEAR)     
@PLOT=@SECTORROTATIONMODEL      
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—Updata support team
support@updata.co.uk
www.updata.co.uk