Lead-series moving-average crossovers with a stochastic and relative strength index

Inverting two averages into a lead series

A moving-average crossover is a signal formed when a shorter simple moving average and a longer simple moving average change order. The archive workflow inverts those two unequal averages into a lead series: the one-bar-ahead close implied by the pair, used to time a predicted cross.

A predicted cross is the bar when price or an oscillator first intersects the lead series. A confirmed cross is the later bar when the two moving averages themselves change order.

Implementations default the shorter average and the longer average on both price and oscillator series, so the same lengths are used whether the lead series is built from price or from an oscillator.

Classifying each bar

Each bar can be classified as unlikely, probable soon, expected on the next bar, or already confirmed. The class depends on where the lead series sits versus the close and versus bands built from recent one-bar rate-of-change extremes.

The unlikely band is a zone around the close built from a long lookback of one-period rate-of-change extremes, scaled into coefficients around the close. A lead series outside those coefficients is treated as an implausible cross.

A probable-soon state requires four conditions at once: the lead series sits inside the likely band, there is no current prediction or confirmation, more than a short span of bars has passed since the last confirmed cross, and a signed comparison of the lead series with the close is in place.

The same construction on a stochastic

The same lead-and-confirm construction can be applied to a stochastic oscillator. That oscillator is bounded: it locates the close inside a lookback high-low range and then smooths that location. The forecast then becomes a stochastic-versus-lead intersection, and confirmation is the later cross of two moving averages of that stochastic.

Relative strength index is a bounded oscillator of average up versus down closes over a defined lookback. In the archive workflow, crossover anticipation is usable together with a slow stochastic and with relative strength index rather than as a standalone replacement for those oscillators.

Scoring predictions and a universe composite

Prediction tallies are scored by whether confirmation arrives on the same bar, after a short delay, or not within a short window.

A universe composite is a daily tally of how many names in a defined list show a prediction or a confirmed cross. In the archive workflow, those composite counts showed the prediction series leading the confirmed-cross series, and that lead was treated as a market-wide property.