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2020issue C088-14

Keep neutrality as a first-class input in three-state market data

Traditional bull-bear spreads can assign the same score to very different three-state mixes, and bull-to-bear ratios become undefined or extreme when one opposing side is near zero. This archive article treats unchanged shares as a first-class construction input for market breadth, on-balance volume, and divergence.

  • Traditional bull-bear spreads can assign the same score to very different three-state mixes.
  • Bull-to-bear ratios become undefined or extreme when one opposing side is near zero.
  • A three-state observation is fully determined by any two of advancing, declining, and unchanged shares.
  • Editorial reading: rebuild market breadth, on-balance volume, and divergence from the three-state mix so neutrality is an input, not leftover noise.
Entries in this reading3 entries
Current trackOn-balance volume88 readingsMarket breadth147 readingsPrice-indicator divergence167 readings

The same score can hide different mixes

Traditional bull-bear spreads can assign the same score to very different three-state mixes. A spread that only compares a bull side with a bear side can land on one number while advancing, declining, and unchanged shares sit in different combinations.

Editorial reading: the third state is the usual casualty. Unchanged shares drop out of the score, so neutrality is treated as leftover noise instead of as part of the observation.

Ratios break when one side is near zero

Bull-to-bear ratios become undefined or extreme when one opposing side is near zero. A construction that divides one side by the other cannot stay stable if the opposing side almost disappears.

Editorial reading: that instability is a property of the ratio. It is not a reason to discard advancing, declining, or unchanged shares, and it is not a substitute for the three-state mix.

RDoS on the article's hypothetical sentiment scenarios

RDoS figures are taken from the article's scenario table. Scenarios C, G, and H all score +21 percentage points on a bull-bear spread, yet RDoS reads 0.05, 0.14, and 0.21 once the unchanged share is inside the formula. Balanced mixes sit at zero; the near-unanimous bull cases (I, J) stay large.
RDoS figures are taken from the article's scenario table. Scenarios C, G, and H all score +21 percentage points on a bull-bear spread, yet RDoS reads 0.05, 0.14, and 0.21 once the unchanged share is inside the formula. Balanced mixes sit at zero; the near-unanimous bull cases (I, J) stay large.

Scenario F is any mix with equal bullish and bearish shares (neutral = 100% − 2α); the table fixes RDoS at 0. Values are the published two-decimal readings, not recomputed from the percentages.

Any two states determine the third

A three-state observation is fully determined by any two of advancing, declining, and unchanged shares. Record any pair and the missing share is already fixed. Neutrality does not have to be recovered later as a residual. It can enter the construction as a first-class input from the start.

Editorial reading for breadth, volume, and divergence

Editorial reading: rebuild the three-state record before deriving a market-breadth condition, an on-balance-volume update, or a price-indicator divergence check. Keep the full mix in view so two-state spreads and ratios are not asked to stand in for the observation they collapse.

The teaching point is construction, not a trading rule. Neutrality stays visible when unchanged shares are kept as an input. It disappears when the workflow starts from a bull-bear score and treats everything else as leftover noise.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
61 of 61 in the On-balance volume track
1988Track finished · Next track: Open interest analysisWave-count consensus and open-interest confirmation40 readings
All readings on this track · 61 readings
  1. 1988Cumulative volume trend and 200-session polarity
  2. 1988Three clocks when cumulative volume led price
  3. 1988Payoff index checkpoints for open interest and divergence
  4. 1988Relative strength, stochastics, and on-balance volume as a turning-point stack
  5. 1988Signing volume by open interest change
  6. 1988Case study: weekly on-balance volume with trendlines and a 21-period average
  7. 1988Combining weekly and daily MACD divergences with on-balance volume
  8. 1988Restoring the original tests for market breadth, on-balance volume, and trendlines
  9. 1989Evaluating volume-weighted breadth extremes
  10. 1989Demand oscillator construction with a momentum overlay
  11. 1989Constructing a volume percentage ratio from advance-decline flow
  12. 1990Constructing net positive volume as On-balance volume
  13. 1990Buying-share scale with on-balance volume
  14. 1990Friday-filtered on-balance confirmation lines
  15. 1991Constructing rate-market volume breadth from on-balance volume
  16. 1991Building a breadth composite from on-balance volume breakouts
  17. 1992Constructing a rate-complex volume-breadth index
  18. 1992Constructing a breadth index from on-balance volume
  19. 1992Constructing signed market thrust from issue volume
  20. 1992Constructing indicator phase across averages, volume and bands
  21. 1993Force on-balance volume to agree with itself at slower horizons
  22. 1993Three transforms of market thrust from breadth and volume
  23. 1994Constructing a tick-line momentum oscillator
  24. 1994Constructing a smoothed on-balance tick momentum oscillator
  25. 1994Histogram confirmation and a second-series veto for MACD-family alerts
  26. 1994Constructing a 40-period envelope on on-balance volume
  27. 1996Constructing a matched percent-B volume disparity
  28. 1997Constructing calendar regime overlays and volume-weighted rules
  29. 1997Constructing market thrust from breadth and volume
  30. 1997Constructing on-balance volume as a signed running total
  31. 1997A three-layer construction for a signed volume-force oscillator
  32. 1997Constructing a range-sum volume-force oscillator
  33. 1999On-balance volume confirmation, price-indicator divergence, and bounded exits
  34. 2000A daily long-only confirmation stack on the tether line
  35. 2000A three-filter tether and volume trend system
  36. 2003Constructing finite volume elements as a finite-period money-flow filter
  37. 2003Constructing on-balance volume from signed session volume
  38. 2003On-balance volume as a market-breadth participation ledger
  39. 2003Construct a volatility-adjusted on-balance volume filter before confirming a breakout
  40. 2004Opening and midday ranges as an on-balance-volume breakout case
  41. 2004Constructing a volatility-gated volume-flow measure
  42. 2004Constructing a volume-flow series from on-balance volume
  43. 2004Volume-flow indicator construction from on-balance volume
  44. 2004Volume-flow slope divergence, then separate on-balance-volume and crossover rules
  45. 2004Volume flow and band construction as one inspectable problem
  46. 2004Auditing advance-decline confirmation for scale, horizon, and composition
  47. 2005Bounded market breadth from the Arms index to BRIN
  48. 2006Overnight-hold entry and exit construction
  49. 2007Evaluating Volume-price confirmation versus On-balance volume and MACD
  50. 2009Volume confirmation versus a price advance
  51. 2010Typeahead retrieval of a moving average, on-balance volume, and a stochastic oscillator
  52. 2010Modified volume-price trend and log-price scale alignment
  53. 2010Constructing liquidity accelerometers from advance-decline averages
  54. 2012Failed short cycles as breadth and volume tests
  55. 2016Earnings straddles, implied volatility, and money-flow filters
  56. 2017A volume residual filter and a price projection matrix
  57. 2019Volume-volatility parabola and signed-volume momentum
  58. 2019Separating on-balance volume into breadth and volume
  59. 2020Constructing the obvm signal line
  60. 2020Constructing smoothed on-balance volume with a signal line
  61. 2020Keep neutrality as a first-class input in three-state market data
By fieldIndicators and filters874 readingsBy year2020165 readings
All 88 readings tagged On-balance volume
Also on On-balance volume5 readings
1988Restoring the original tests for market breadth, on-balance volume, and trendlines1989Evaluating volume-weighted breadth extremes1992Constructing a breadth index from on-balance volume1992Constructing a rate-complex volume-breadth index1992Constructing signed market thrust from issue volume