Z-score value filter on reversals and Donchian entries

A parameter-free short-term reading

The short-term value oscillator is built by z-score normalization of an ordered window of recent prices. It uses no free parameters. It is presented as a short-term overbought and oversold measure that is not meant to stay pinned in those zones through a developing trend or to inherit the lag of moving-average oscillators.

A reading below -8, described as two standard deviations, is treated as short-term undervalued. A reading above +8 is treated as short-term overvalued. Extremes are read in standard-deviation units so that a fixed band can mark short-term cheapness or richness without extra free parameters.

Cuts that change sample size, not construction

Narrower or asymmetric bands, including the interval from -7 to +7 or a bull-market undervaluation cut of -6, are offered only to raise backtest sample size and signal count. They are not a change in how the oscillator is constructed.

The value distribution is described as potentially skewed in bull or bear markets, so the fixed -8 and +8 cuts could be shifted. The same tests were reported to look similar across futures and equities.

An add-on beside other entry rules

Bull-market tests compared undervalued entries with random entry, overvalued entry, a random-plus-undervalued hybrid, and dollar-cost averaging. The oscillator is framed as an add-on rather than a complete trading system.

A conjunction filter does not replace the baseline rule. It admits only those baseline signals that also print a sufficiently low normalized reading.

A key-reversal bar with a value gate

A key-reversal bar is defined as a bar that opens below the prior close and closes above the prior high. That pattern is an objectively coded baseline whose signals can be thinned by a valuation filter. Requiring the oscillator also to be below -8 reduced the count of valid reversal entries by about half.

A trend-filtered Donchian breakout

The trend-following rule entered when a 25-bar simple moving average was above a 75-bar simple moving average and price broke above the highest high of the prior five bars. The average pair is a trend filter that keeps breakouts inside an established uptrend. The price condition is described as a five-period Donchian breakout.

The same oscillator-below -8 gate was then required on those Donchian-plus-trend-filter entries. The average path was tracked for 50 days after entry against the unfiltered rule.

Charts and shorter candidate lists

The oscillator is described as usable on charts and as a scan constraint. The scan keeps only names whose reading is above or below a chosen level, and thereby shortens candidate lists produced by other rules.