Did you know that a detrended signal, combined with an
optimum smoothing filter, can produce an extremely
responsive oscillator-type indicator that catches every
cyclic turn as it happens? Itís true! Here are the details.
All pulse echos here must be a jillion ways to
detrend price data, and a good
chunk of them have already been
explored in print. Given that, I
had to have a new and significant approach to the subject -
and here it is. I discovered that a
detrended signal, combined with an optimum smoothing filter, can produce an extremely responsive oscillator-type indicator.
I borrowed the concept of
this new detrending approach
for the markets from radar circuit designs, so to understand how it works, letís first take a
look at how radar works.
To refresh your memory, radar (which is an acronym, sort
of, for radio detecting and ranging) works by transmitting a high-powered radio-frequency (RF) pulse and listening for the return
echoes from various targets. RF energy travels at the
speed of light, and so the round-trip time for an echo
comes out to 12.4 microseconds per mile. The distance of the target from the transmitter is determined
by measuring the time it takes for the echo to return.
After sufficient time has elapsed so no more echoes
are expected, the radar transmits another pulse. The
process is repeated, and the time between pulses is referred to as the pulse repetition interval (PRI).