The TD Range Expansion Index (TD REI)
by Thomas DeMark
Here, the author of The New Science of Technical Analysis
and the brand-new New Market Timing Techniques explains
how to use the TD REI and the TD Price Oscillator Qualifier.
Throughout my 26-year career in the investment business, I have studied and tested many widely followed market timing oscilla-tors. Overall, I have questioned their construction, ambiguous in-terpretation and discretionary application.
Consequently, I have developed my own series of indicators,
and to simplify their application, I have assigned to them an objective interpretive process. In The New Science of Technical Analysis I pre-sented the TD Range Expansion Index (TD REI), and now I have improved upon it, as explained in my latest book, New Market Timing Techniques. Here, then, is a discussion of salient TD REI components, as well as the trigger mechanism referred to as the TD Price Oscillator Qualifier (TDPOQ). The TDPOQ is critical to the proper application and execution of the TD REI as well as many other widely followed over-bought/oversold oscillators.
My frustration with most conventional overbought/oversold
oscillators stems from the steps typically used to calculate
them. Most often, the method for calculation requires not just a comparison of two consecutive daily closing prices, but also a series of daily indicator values calculated by using exponential smoothing. Other than the fact that it has become market convention to perform these mathematical exercises for most widely followed indicators, there seems to exist no other reason to make such daily comparisons or complicated calculations.