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2013issue C0843-50

Constructing fair-value filters from averages and momentum

A lookback average recenters the valuation axis on recent transactional activity, and volatility units mark when price leaves a fair-value band. Editorial reading: treat that departure as the trend filter, then read a momentum overlay only after price has already left the central band.

  • A lookback average recenters the valuation axis so each new print is scored against recent transactional activity rather than a fixed scale.
  • Volatility units that expand and contract with price mark five zones, with the fair-value band at one standard deviation around the range where most historical transactions clustered.
  • A trend filter can withhold new entries while price remains inside that fair-value band, and a momentum overlay is read with band location as one procedure.
  • Screening lists, alerts, segmented bar color, a valuation histogram, and dual-horizon overlays turn the same levels into jointly testable entry, exit, or abstention rules.
Entries in this reading3 entries
Current trackMomentum strategy103 readingsTrend filter137 readingsMoving average449 readings

Recenter the axis on a lookback average

The archive workflow starts by recentering a valuation axis on an average price computed over a chosen lookback. That lookback average is a rolling mean of transactional prices, so each new print is scored against recent transactional activity rather than a fixed scale.

Volatility units then wrap that center. A volatility unit is a dynamic deviation increment that widens or narrows the valuation bands as price variability changes. Those expanding and contracting units mark when activity leaves a central range and enters an outer zone.

Five zones around a fair-value band

The constructed display uses five valuation zones. The fair-value band is the central zone, set at one standard deviation around the range where most historical transactions clustered. Moderate outer zones occupy the interval between one and two standard deviations. Extreme zones begin beyond two standard deviations.

A trend filter, in this construction, treats a move out of the fair-value band as a regime change and can withhold new entries while price remains inside that band.

Share of June 2013 E-mini S&P days beyond each volatility threshold

On the June 2013 E-mini S&P daily window from February through mid-May, most prints stay inside the plus-or-minus 4 fair-value band. The Price Action Profile table puts only 0.60 percent of the sample beyond +8 volatility units and none beyond −8, which is why a break of that central band is the filter before any momentum overlay. The figures are the software’s own Over/Under percentages, not a tracing of the histogram bars.
On the June 2013 E-mini S&P daily window from February through mid-May, most prints stay inside the plus-or-minus 4 fair-value band. The Price Action Profile table puts only 0.60 percent of the sample beyond +8 volatility units and none beyond −8, which is why a break of that central band is the filter before any momentum overlay. The figures are the software’s own Over/Under percentages, not a tracing of the histogram bars.ES 06-13 · Daily · 2013-02-01T00:00:00.000Z to 2013-05-31T00:00:00.000Z

Over N is the share of daily bars at or beyond +N dynamic volatility units; Under −N is the share at or beyond −N. Window header is ES 06-13 Daily, lookback 14. The live reading at capture was 8.4652 units, tagged significantly overvalued.

Read the same levels on more than one display

A valuation histogram restacks those valuation bars on a scale from +12 to -12, assigning the central band to +4 through -4 and the extreme bands from +8 and from -8. That frequency stack shows how often price occupied each signed band over the chosen sample.

Conventional price bars can be segmented by zone color so a single bar may show both central-band and outer-band portions instead of one all-or-nothing color.

The same levels can be computed on one sampling interval and plotted under bars of another. That dual-horizon overlay includes five-minute bars on 20-minute levels and 15-minute bars on 60-minute levels.

Keep momentum and the bands as one procedure

A momentum overlay can sit in a lower panel with the valuation overlay so reversals on the bars are read together with band location as one procedure. Screening lists, alerts, and bars that color only when several conditions hold at once convert the filter into explicit, jointly testable entry, exit, or abstention rules.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
38 of 51 in the Momentum strategy track
201451-56 pp.Next on Momentum strategyConstructing a multi-window slope divergence entryCompare linear-regression slopes of a stochastic momentum series and of the close over three lookback windows to detect disagreement in direction.
All readings on this track · 51 readings
  1. 1984Half-cycle differencing for momentum signals
  2. 1987Relative strength evaluation under competing optimization criteria
  3. 1988Weekly MACD as a two-clock momentum confirmation stack
  4. 1989Equal-weight zero-cross from smoothed spreads
  5. 1989Testing relative-strength-index reversal rules against trend continuation
  6. 1989Smoothed three-day futures filter for index option bounces
  7. 1989Cycle-length windows for momentum, Relative Strength Index, and stochastic construction
  8. 1991Filtered rally magnitude as a bull-regime breakout
  9. 1992Constructing true strength from double-smoothed momentum
  10. 1992Constructing a double-smoothed true strength index
  11. 1993When momentum structure and breadth break together
  12. 1993Constructing double-smoothed range and momentum oscillators
  13. 1993Constructing a two-parameter relative momentum index
  14. 1993Building a bounded momentum oscillator with RSI smoothing
  15. 1993Two-speed oscillators with divergence and trendline gates
  16. 1993Constructing a relative momentum index from the relative strength index
  17. 1994Constructing daily advance-decline breadth tools
  18. 1994Building a composite regime score from monetary climate and weekly trend
  19. 1994Averaging Relative Strength Index and the stochastic oscillator into one reversal oscillator
  20. 1995Dividend-yield regression as a hold versus momentum gate
  21. 1996Jump and hold filters for long-term Treasury yield direction
  22. 1997Constructing extendedness from a 10 percent swing filter
  23. 1997A range-expansion oscillator that can refuse its own stretch
  24. 1997RSI trend permission and Fibonacci pullback rules
  25. 1998Nested midpoint construction for a range-normalized oscillator
  26. 1999Evaluating Relative Strength Index momentum with zero-line and threshold rules
  27. 1999Treat RSI and momentum as three mechanical procedures
  28. 2000Thrust strength figure from moving-average swings
  29. 2001Constructing a non-range-bound balance of market power score
  30. 2004Cleaned breadth oscillator and new-high divergence: a swing-market case file
  31. 2004Evaluating advance-issues-momentum on a fixed-symbol-basket
  32. 2004Constructing a trend filter from two adjacent high-low windows
  33. 2006A dollar-versus-commodity extreme as a regime case
  34. 2008Zero-centered stochastic bands and bracket stops
  35. 2012Evaluating engulfing momentum across hold windows
  36. 2012Staged stops as one mechanical entry and exit procedure
  37. 2012Stacking a relative-strength-index forecast, a trend filter, and long-only momentum
  38. 2013Constructing fair-value filters from averages and momentum
  39. 2014Constructing a multi-window slope divergence entry
  40. 2015Bandedge trend filter construction with inverse crossover rules
  41. 2017Opposite rules for index price and volatility momentum
  42. 2018A three-state overlay that colors a trend only after the line clears the bar
  43. 2018Half-cycle relative-strength index with a Fisher map for cyclic reversals
  44. 2018Emotion as a rule input when momentum breaks
  45. 2018Two-bar body expansion as a momentum breakout construction
  46. 2019Pair a two-day high breakout with a volume-weighted exit on the same chart
  47. 2020Building reflex and trendflex cross and extreme entry rules
  48. 2020Construct a dual-series price momentum oscillator overlay
  49. 2020A multi-timeframe stochastic as a panel of weekly voters
  50. 2020Centerline crossovers that compare index momentums
  51. 2020Multi-timeframe stochastic voting as one mechanical rule
By fieldIndicators and filters682 readingsBy year201398 readings
All 103 readings tagged Momentum strategy
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