Daily Directional Bias Indicator (S&P 500)

2024년 12월 2일

This indicator is designed to help you be on the right side of the trade.

Most traders who struggle to know which way price may move are only looking at part of the picture. This Directional Bias Indicator uses both the Accumulation/Distribution Line and VIX for directional confirmation.

The Accumulation/Distribution Line

The Accumulation/Distribution (ACC) line helps us gauge market momentum by showing the cumulative flow of money into or out of an asset. When the ACC line is rising, it suggests that buying pressure is dominating, indicating a bullish market. Conversely, when the ACC line is falling, it suggests that selling pressure is stronger, indicating a bearish market. By comparing the ACC line with the VWAP, traders can see if the price is moving in line with the overall market sentiment. If the ACC line is above the VWAP, it suggests the market is in a bullish phase; if it's below, it indicates a bearish phase.

The VIX

The VIX (Volatility Index) is often referred to as the "fear gauge" of the market. When the VIX is rising, it typically signals increased market fear and higher volatility, which can be a sign of bearish market conditions. Conversely, when the VIX is falling, it suggests lower volatility and a more stable, bullish market. Using the VIX with the VWAP helps us confirm market direction, particularly in relation to the S&P 500.

VWAP

For both the ACC Line and VIX, we use a VWAP line to gauge whether the ACC line or the VIX is above or below the average. When the ACC line is above the VWAP, we view it as a sign that price will go up. However, because the VIX has an inverse relationship, when the VIX falls below the VWAP, we take that as a sign to go long.

How to use

• The yellow line represents the ACC Line.
  
• The red line represents the VWAP based on the ACC line.
  
• The triangles at the bottom simply show when the ACC line is above or below the VWAP.
  
• The triangles at the top show whether the VIX is bullish or bearish.
  

If both triangles (top or bottom) are bullish, this confirms that the price of an asset like the S&P 500 will likely go up. If both triangles are pointing down, it suggests that price will fall.

As always, test for yourself.

Happy trading!