Momentum Rotation Indicator

The Momentum Rotation Indicator [CC] indicator provides a relative strength analysis by comparing the momentum of an individual asset against a benchmark index to identify market leadership and rotation trends.

Usage

The Usage section focuses on identifying shifts in relative performance. The indicator appears as an oscillator in a separate pane, changing color based on the directional momentum of the asset relative to a benchmark (typically the S&P 500).

• Bullish Signals: When the oscillator line turns green, it indicates that the asset's momentum is outperforming the benchmark's momentum over the selected lookback periods, suggesting a potential breakout or period of outperformance.
• Bearish Signals: When the oscillator line turns red, it suggests the asset is underperforming the benchmark, which may precede a trend reversal or a period of relative weakness.

Users can monitor the slope and color of the line to gauge whether a stock is gaining or losing traction compared to the broader market.

Details

This tool is loosely based on the Sector Rotation Model proposed by Giorgos E. Siligardos. It functions by calculating the Rate of Change (ROC) for both the current asset and a benchmark symbol (defaulting to "SPY") across two different time horizons (Length1 and Length2).

The script calculates the average ROC for both the asset and the benchmark, finds the difference between these averages, and then applies an Exponential Moving Average (EMA) to smooth the resulting value. This smoothing helps filter out noise and highlights the underlying trend in relative momentum.

Settings

• Length1: The primary lookback period used for the short-term Rate of Change calculation and the final EMA smoothing.
• Length2: The secondary lookback period used for the long-term Rate of Change calculation.
• S&P 500 Symbol: The benchmark ticker used for comparison (defaults to SPY).
• Source: The price data used for calculations (e.g., Close, Open, High, Low).
• Resolution: The timeframe from which the data is pulled.
• Allow Repainting?: Toggles whether the indicator uses data from the current unconfirmed bar.
• Allow Bar Color Change?: Enables or disables the changing of candle colors on the main chart based on the indicator's state.

FAQ

How do I interpret the colors?

A green line signifies that the asset's relative momentum is increasing, while a red line indicates that the relative momentum is decreasing compared to the previous bar.

Can I change the benchmark?

Yes, you can change the "S&P 500 Symbol" in the settings to any other index or asset to compare your current ticker against a different sector or market.

How can I access the Momentum Rotation Indicator [CC]?

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