Stocks & Commodities V. 23:3 (38-41): Sidebar: VOMOMA by Stephen Bisse
Simple moving averages (SMA) are great tools for filtering out noise from time series, but all they can do is show where a time series has been. The only way in which a moving average can point the way to future market direction is if additional, leading information is included in the calculation.
The idea behind VOMOMA is that both the magnitude of
moves between datapoints and the volume are leading
indicators of the market direction. To calculate VOMOMA, the first step is to calculate a MOMA. Adjust each datapoint in the lookback period by the absolute move that preceded it as a percentage of the sum of all the absolute moves in the lookback period. . .