1994·issue C01·1-2

Constructing a tick-line momentum oscillator

Daily closing ticks are integer-smoothed with a 10-period exponential average, rated as plus one, zero, or minus one, accumulated into an on-balance tick line, and then reduced to a five-day momentum series that a second exponential average turns into an oscillator that can be computed by hand or in a spreadsheet.

• A 10-period exponential average of the daily closing tick is seeded from a 10-day simple average that is truncated to whole numbers so the smoother can tie the integer tick and allow a zero rating.
• Each day receives a rating of 1, 0, or -1 from the comparison of the closing tick with the prior day's exponential average, and those ratings accumulate as an on-balance tick line that starts at 1.
• Five-day momentum is the change in that running total across five observations, and a five-period exponential average of that momentum, seeded from a five-day simple average and updated with a 0.333 weight, is the finished oscillator.
• Editorial reading: keep the integer baseline, the signed on-balance flow, the momentum difference, and the second smoother as separate checks so each transform can be verified on its own.