200 Week Moving Average Heatmap

The 200 Week Moving Average Heatmap indicator provides a long-term investment framework for identifying market cycle tops and bottoms by analyzing the rate of change in the 200-week simple moving average (SMA). It serves as a macro-analysis tool to help investors visualize when an asset is overextended or historically undervalued relative to its long-term trend.

Usage

The Usage section focuses on interpreting the color-coded heatmap and valuation scale to determine market cycles. The indicator is primarily designed for high-market-cap assets like Bitcoin, which have historically respected the 200-week SMA as a cycle floor.

• Heatmap Interpretation: The indicator plots colored dots on the price chart. Cooler colors (purple and blue) indicate periods where the 200-week SMA's growth is slow, often coinciding with market bottoms or accumulation phases. Warmer colors (orange and red) indicate rapid growth in the SMA delta, which historically signals market peaks and overbought conditions.
• Valuation Scale: A table on the right side of the chart displays a valuation score ranging from -1 to 1. A score approaching 1 suggests the asset is significantly undervalued (bottoming), while a score approaching -1 suggests the asset is highly overvalued (topping).
• Long-term Investing: Investors can use the heatmap to time entries during "cold" phases and consider exits or profit-taking during "hot" phases.

Details

The 200 Week Moving Average Heatmap is based on a model originally created by Plan B (@100trillionUSD). The technical implementation involves calculating the percentage change (Delta %) of the current 200-week SMA compared to its value four weeks ago.

The script performs the following logic:

1. SMA Calculation: It tracks the simple moving average over a long-term period (equivalent to 200 weeks).
2. Delta Normalization: The four-week delta is normalized over a 2000-bar lookback period to determine where the current price movement sits relative to historical volatility.
3. Color Mapping: The resulting values are mapped to a multi-step gradient (purple → blue → green → yellow → orange → red) based on the strength of the delta.
4. Valuation Output: The tool rescales the normalized delta into a standardized valuation score for easier quantitative analysis and alert triggering.

Settings

• 200 Week MA: This plot visualizes the underlying 200-week simple moving average on the chart.
• Colored Values: This setting controls the visualization of the colored circles ("●") that represent the heatmap state.
• Valuation Scale: A hidden plot that provides the quantitative valuation score (-1 to 1) for use in data exporting or secondary indicators.
• Delta % Changing: A hidden plot that tracks the raw percentage growth of the SMA over a 4-week rolling window.

FAQ

How do I interpret the valuation score in the table? The valuation score quantifies market extremes. Scores near 0.8 to 1.0 indicate the asset is entering a historical bottoming zone, while scores near -0.8 to -1.0 indicate the asset is reaching a historical cycle peak.

Can this indicator be used for day trading? No, this indicator is specifically designed for macro-cycle analysis. Because it relies on a 200-week moving average, the signals evolve over months and years, making it unsuitable for short-term or intraday trading.

How can I access this indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.