Traders.com

TRADECISION, SECTOR ROTATION MODEL (SRM) INDICATOR

In “Applying The Sector Rotation Model” in this issue, author Giorgos Siligardos demonstrates two simple tools that can help to incorporate the macro perspectives of the stock market in technical analysis. Both are based on macro fundamentals, both have a technical application, and both have signals that usually precede major market reversals and highlight signals from classic technical analysis. In his article, Siligardos explains the logic of the first — the sector rotation model (SRM) — and presents a simple indicator to monitor its waves (Figure 14).

FIGURE 14: TRADECISION, SECTOR ROTATION MODEL INDICATOR. Here is the SRM indicator plotted on an S&P 500 daily chart.

Here is the code to recreate the SRM indicator using Tradecision’s Indicator Builder.

SRM indicator:
{Roc look back period in trading days}
Ins
lbp:"Roc Parameter",75,10,200;
End_ins
var
Bull01:= 0;
Bull02:= 0;
Bear01:= 0;
Bear02:= 0;
Bear03:= 0;
Bear:=0;
Bull:=0;
end_var
{Roc calculation}
Bull01:= External("C", "XLY")/Ref(External("C", "XLY"),-lbp)-1;
Bull02:= External("C", "XLF")/Ref(External("C", "XLF"),-lbp)-1;
Bear01:= External("C", "XLE")/Ref(External("C", "XLE"),-lbp)-1;
Bear02:= External("C", "XLU")/Ref(External("C", "XLU"),-lbp)-1;
Bear03:= External("C", "XLP")/Ref(External("C", "XLP"),-lbp)-1;
{averages}
Bear:=(Bear01+Bear02+Bear03)/3;
Bull:=(Bull01+Bull02)/2;
{Oscillator}
return 100*(Bull-Bear);

—Yana Timofeeva, Alyuda Research
510 931-7808, sales@tradecision.com
www.tradecision.com