1993issue C101-11

Physics analogies for building cycle and money flow indicators

Editorial reading: construction here is a translation of price, volume, and cycle period into a few physics relations, then a check of whether the resulting series turn before the raw chart.

Restoring-pull uses volume and the measured cycle period as a market analog of spring stiffness, and a changing pull is proposed as a reversal cue.
On the illustrated June 1993 Deutschemark and S&P 500 charts, a six-bar exponential average of restoring-pull rose before the next price move, eased during that move, then rose again near a reversal.
A maximum-entropy-spectrum and a cycle-finder overlay both put the dominant-cycle-period near 14 days on the S&P 500 sample, and both fitted worse as the period lengthened.
If price is treated as a sine wave, true-momentum leads by a quarter cycle, and a six-period money-flow-index preceded every major turn on the illustrated Treasury-bond and S&P 500 charts.

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Current trackMoney Flow Index16 readings Maximum entropy spectrum analysis30 readings Dominant cycle detection119 readings

Two series from the same ingredients

The archive builds two related series from volume, price change, and a measured cycle period. Restoring-pull treats volume and that period as a market analog of spring stiffness. The money-flow-index is a smoothed true-momentum series, and true-momentum is volume times the bar-to-bar price change.

The dominant-cycle-period is estimated from ordered prices and then inserted into the indicator instead of a fixed lookback. A maximum-entropy-spectrum is used to track that short-term length bar by bar so the period-dependent series can update.

Restoring-pull from volume and cycle period

A market analog of spring stiffness can be written as volume times the square of two-pi divided by the measured cycle period. That constructed series is the restoring-pull.

The restoring-pull construction is not constant whenever volume or the dominant-cycle-period changes. The changing pull is proposed as a reversal cue.

Smoothed restoring-pull on the illustrated charts

On a June 1993 Deutschemark chart, a six-bar exponential average of restoring-pull rose before prices rose, eased as prices rose, then rose again near a trend reversal.

On a June 1993 S&P 500 chart, the same smoothed restoring-pull series rose before a downtrend, eased as prices fell, then rose again before an upside reversal.

June 1993 Deutschemark with restoring-pull indicator

Deutschemark June 1993 futures climb from the high 580s to the mid-630s, then roll over. The six-bar EMA of restoring pull, read off the lower pane, rises first (A), fades as the advance matures (B), and firms again just right of center (C) before price reverses. Prices are taken from the printed scale; the indicator is the unsized lower trace.June 1993 Deutschemark futures (DM 93M) · daily bars · 1993-03-01T00:00:00.000Z to 1993-06-14T00:00:00.000Z

RPI is Volume times (2π/Period) squared, then smoothed with a six-bar EMA. The lower pane has no printed scale, so those points are relative height only and must not be treated as calibrated indicator units. Price quotes on the header are in cents (last bar OP 61.62 HI 61.73 LO 61.54 CL 61.71 on 14 Jun 1993); the left scale is the same series times ten.

Reading the dominant-cycle-period

A maximum-entropy-spectrum of that S&P 500 sample put the dominant cycle near 14 days for most of the window and showed the period lengthening toward the right edge.

Spacing successive lows with a cycle-finder overlay on the same S&P 500 contract also measured about 14 days and likewise fitted worse as the period lengthened.

True-momentum and the money-flow-index

If price is treated as a pure sine wave, volume times price change becomes a cosine series and therefore leads the price wave by a quarter cycle. That product is true-momentum, used as a money-flow signal rather than as a simple price-difference oscillator.

The money-flow-index is the smoothed form of that series. Its turns are compared with later price turns when the market is treated as cyclic.

A six-period exponential average of volume times today’s close minus yesterday’s close preceded every major turn on the illustrated June 1993 Treasury-bond and S&P 500 charts.

Educational research material, not investment advice. Historical source context does not establish present-day performance.

5 of 13 in the Money Flow Index track

19941-7 pp.Next on Money Flow IndexKeep a wave count as a draft until money flow and a trendline agreeElliott wave structure maps a five-wave advance of impulse waves 1, 3, and 5 plus corrective waves 2 and 4, then a three-wave a-b-c decline, with each wave subdivisible into smaller degrees.

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