Percent Difference Oscillator by Darryl W. Maddox
To determine intermediate-term turning points in the Dow Jones Industrial Average (DJIA), I use a procedure that I call a percent difference oscillator. The data gleaned from the use of the oscillator can be used to time fund-switching or stock index option buying and
The oscillator involves calculating an 18-day moving average, the difference between the current day's close and the 18-day moving average and then expressing the difference as a percentage of the 18-day moving average. The calculation is as follows:
%Diff. = (Current value - 18-day mov. avg. / 18- day mov. avg.) x 100%.
Any moving average can be used to adjust for the various fundamental frequencies of the swings of the market. I started out using a 15-day moving average last year but then found that I got more consistent peaks using the 18-day moving average. About every six to eight months I check averages varying in length from 15 to 21 days to see which is currently giving the most consistent results.