Lowess Channel + (RSI)

The Lowess Channel + (RSI) indicator provides a sophisticated trend-filtering framework by applying the Locally Weighted Scatterplot Smoothing (LOWESS) algorithm to price data to create a responsive, dynamic channel. It is designed to filter market noise while highlighting trend shifts and volatility-based overbought/oversold zones.

Usage

The Lowess Channel + (RSI) can be used to identify trend direction and potential reversal points. The central midline acts as the primary trend filter: when the line turns green, it indicates a bullish trend, and when it turns purple (or the user-defined bearish color), it indicates a bearish trend.

The indicator plots "Trend Shift Diamonds" (◆) specifically at the moment the midline changes color, signaling a potential change in market momentum. Traders can use the four outer bands—calculated using ATR-based deviations—to identify volatility extremes. Prices reaching the outer bands may suggest overextended conditions.

Furthermore, an RSI gauge is displayed on the far right of the chart. This gauge maps the current RSI value directly onto the price scale relative to the channel, allowing for a combined analysis of momentum and price structure without needing a separate sub-pane.

Details

LOWESS (Locally Weighted Scatterplot Smoothing) is a non-parametric regression method. Unlike a standard moving average which gives equal or linearly decaying weights, LOWESS fits weighted linear regressions at localized segments of the data.

In this implementation, the script uses a Gaussian-style weighting function to prioritize data points near the center of the lookback window. This results in a smoother trendline that is less reactive to outliers while maintaining a high degree of adaptability to structural trend changes. The bands are projected from this smoothed midline using a multiple of the Average True Range (ATR) to ensure the channel width reflects current market volatility.

Settings

Lowess Channel

• Length: Determines the lookback period for the LOWESS algorithm. Higher values result in a smoother, more lagged line, while lower values are more responsive.
• Bands: A multiplier for the ATR-based bands. Increasing this expands the width of the channel.

RSI

• RSI (Toggle): Enables or disables the visibility of the RSI gauge on the right side of the chart.
• RSI Length: Sets the period used for the Relative Strength Index calculation.

Color

• Bullish Color: The color applied to the midline and gauge when the trend is rising.
• Bearish Color: The color applied to the midline and gauge when the trend is falling.
• Bands Color: The color used for the dashed volatility bands.

FAQ

How do I interpret the RSI gauge on the right?

The gauge visualizes the RSI value (0-100) scaled to the height of the channel. A ◈ symbol marks the current position; if it is near the top of the vertical line, momentum is high, whereas a position near the bottom indicates low momentum.

What do the diamond symbols on the midline represent?

The ◆ symbols appear whenever the LOWESS midline switches from a "rising" state to a "falling" state or vice versa, serving as a visual alert for trend transitions.

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.