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2014issue C1312-18

Construct a trough-to-trough cycle map with the Detrended Price Oscillator

The Detrended Price Oscillator is built as close minus a moving average taken (n/2)+1 periods earlier so trend is stripped and the cycle remains. Length is then marked trough to trough, and named deviations show whether that timeline is shortening, lengthening, or flattening.

  • Measure cycle length trough to trough, not peak to peak, because troughs are treated as more stable anchors.
  • Build the Detrended Price Oscillator as close minus the moving average from (n/2)+1 periods earlier to strip trend and leave the cycle.
  • Use extreme, extended, failed, and reverberating peaks or troughs to read whether the cycle timeline is shortening, lengthening, or flattening.
  • Treat the construction as useful in moderately trending or velocity conditions, and not as useful when price is sideways.
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Detrended Price Oscillator3 readingsCurrent trackDominant cycle detection119 readings

Editorial frame

TradersWeek editorial aim: build a trough-to-trough cycle map from the Detrended Price Oscillator so timeline shifts can be classified before price completes a top or bottom. The archive facts below describe that historical construction workflow.

Strip the trend, keep the cycle

The Detrended Price Oscillator is constructed by subtracting a displaced moving average. The specified form is close minus the moving average from (n/2)+1 periods earlier. The subtraction is used to strip trend and leave the cycle.

Anchor the map at troughs

Cycle length is measured trough to trough rather than peak to peak because troughs are treated as more stable anchors than peaks.

Name the deviations

Named cycle deviations are the vocabulary for reading whether the cycle timeline is shortening, lengthening, or flattening. That vocabulary includes extreme and extended peaks or troughs, failed peaks or troughs, and reverberating cycles.

Weekly Dow Jones Industrial Average

An eight-period weekly setting on the Dow Jones Industrial Average is used to show failed peaks and lower troughs forming before a top begins. On the same weekly series, an extreme trough precedes the 2008 final low, a failed peak flags 2009 cycle weakness, and a higher trough is treated as the 2009 absolute low. After that extreme trough the weekly Dow cycle is described as reverberating, with no true peak or trough from July 2009 to April 2010.

Nasdaq Composite and General Electric

A weekly eight-period setting on the Nasdaq Composite is used the same way. Failed peaks and lower troughs mark topping, and a 2008 extreme trough precedes the 2009 final low. A five-period setting on General Electric shows an extended trough before the October bottom, a November reverberation, then a resumed trough-to-peak cycle.

Conditions that fit the construction

The construction is presented as useful in moderately trending or velocity conditions and not as useful when price is sideways, because the oscillator is meant to expose the cycle inside a trend.

Eight-period Detrended Price Oscillator on weekly DJIA

Weekly eight-period Detrended Price Oscillator on the Dow Jones Industrial Average from mid-2005 to the 5 January 2012 print. An extreme trough near −2800 precedes the late-2008 price washout, a higher trough near −650 marks the 2009 floor, the mid-2009 to mid-2010 stretch stays choppy without a clean peak or trough, and later failed, lower oscillator peaks lead the 2010 and 2011 setbacks. Levels were read from the labeled oscillator pane; the last point is the boxed 557 reading on the scale.
Weekly eight-period Detrended Price Oscillator on the Dow Jones Industrial Average from mid-2005 to the 5 January 2012 print. An extreme trough near −2800 precedes the late-2008 price washout, a higher trough near −650 marks the 2009 floor, the mid-2009 to mid-2010 stretch stays choppy without a clean peak or trough, and later failed, lower oscillator peaks lead the 2010 and 2011 setbacks. Levels were read from the labeled oscillator pane; the last point is the boxed 557 reading on the scale.DJIA · weekly · 2005-07-01T00:00:00.000Z to 2012-01-31T00:00:00.000Z

Source fixes oscillator length at eight weeks and measures cycle length trough to trough, never peak to peak. Digitized points are approximate to the nearest 50–100 index points except the boxed last value.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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201548-49 pp.Next on Dominant cycle detectionDominant-cycle alignment before an earnings catalystThe daily dominant-cycle was measured as an average 14-bar trough-to-trough-interval and was used only as confirming evidence of the April 2015 turn.
All readings on this track · 31 readings
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  2. 1987Constructing a cycle-scaled trend oscillator
  3. 1987Constructing a dominant-cycle grid from marked lows
  4. 1988Cycle lead from staggered exponential averages
  5. 1988Auditing the forty-month stock-price cycle
  6. 1989When long-wave dominant cycles cannot be disproved
  7. 1991Half-cycle average plot shift versus cycle attenuation
  8. 1991Half-cycle average contact as an amplitude-ratio test
  9. 1993Building a restoring-pull indicator from cycle frequency and volume
  10. 1995Regime filters for a dominant long wave
  11. 1995A cycle-tuned lead filter from bounded oscillators
  12. 1998Testable cycle rules instead of fear and greed
  13. 1999Nested Euro cycle timing as one checkable procedure
  14. 2002Constructing an instantaneous trendline from a dominant cycle
  15. 2002Half-cycle center of gravity oscillator from moving-average balance
  16. 2004Testing a locked forty-week cycle with a hold-or-sit-out rule
  17. 2005Nested timing bands for dominant-cycle confirmation
  18. 2005Dominant-cycle baselines versus policy-news narratives
  19. 2006Pairing a dominant-cycle horizon with trend and oscillators
  20. 2006A dominant-cycle split into a trend filter and residual Relative Strength Index
  21. 2007Construct a momentum difference from the dominant cycle
  22. 2007Naive dominant-cycle rules fail without crowd tests
  23. 2012Constructing a dominant-cycle forecast as a timing window
  24. 2012Open-parameter construction of dominant-cycle baselines
  25. 2013Using a second-term election to check a predeclared dominant-cycle forecast
  26. 2014Constructing a dominant-cycle forecast baseline
  27. 2014Quotient transform as an early-onset trend filter
  28. 2014Construct a trough-to-trough cycle map with the Detrended Price Oscillator
  29. 2015Dominant-cycle alignment before an earnings catalyst
  30. 2017Causal reverse exponential average for cycle and trend
  31. 2020Constructing a cycle-plus-trend oscillator from a one-wavelength chord
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