US Market Strength Index

2023年10月11日

Intro:
It is quite a task to track multiple Indices and market internals to decide which way markets are going, especially when you are in a Trade. You may also get conflicting signals making it harder to confidently decide on your trade bias.

US Market Strength Index a.k.a. US MSI indicator aims to simplify decision-making by coloring the lower panel Green when a majority of market participants are bullish and Red when they are bearish. The code analyses the direction and strength of various US indices & market internal futures contracts to decide the color. The shade of color also changes from Dark to Bright when the momentum is relatively strong. A weighted score is assigned to individual contracts and the color (& shade) are selected based on average score in real-time, for changes in direction and momentum.
A Futures contract provides a proxy and generates price & volume data to analyze the direction and strength. Also, they are traded by sophisticated market participants for about 23 hours a day!

Trading with the general market sentiment in your favor can potentially improve a trade's edge. For example, if various market indices (DOW JONES, S&P 500, NASDAQ, etc.) are positive; bullish, or LONG trades might work out in individual stocks. This may occur due to the following reasons:

• Seeing prices rise, Sellers may choose to Sell at Higher prices
  
• Buyers might be attracted to buy into stocks, as the prices are trending higher
  
• SHORT sellers might get cautious of rising prices and may not Open SHORT positions until the current bullish sentiment dies off
  
• Existing SHORT sellers may close their positions due to margin squeeze, possibily fueling more buying
  

The same logic applies when the market indices are in the negative territory, SHORT trades may have a higher probability of working out.

Features:

1. The bright Green color in the lower panel indicates a strong bullish market strength
   
2. The dark Green color in the lower panel indicates bullish market strength, but a relatively weaker
   
3. The bright Red color in the lower panel indicates a strong bearish market strength
   
4. The dark Red color in the lower panel indicates bearish market strength, but a relatively weaker
   

Basic Set-Up:

1. Add the Indicator to the chart
   
2. You can change the default colors for Market Bearish, Market Bullish, Market Bearish weak, and Market Bullish weak
   

Important Notes:

1. You should analyze the stock’s technical data and use prudent risk management for every trade. Trade entries and exits should always be based on the symbol you are trading.
   
2. Use the US Market Strength Index as one of the factors to decide your trade bias and filter symbols that support your analysis.
   
3. Just because Indices and Market Internals point in a certain direction, it does not guaranteed that a stock could behave the same way.
   
4. Also, since this script uses futures contracts, you would need real-time futures data subscription for real-time analysis. At the minimum, you need CME/ CBOE exchange data.
5. This tool is suited for US Regular Trading Session, but since the US MSI is using futures contracts, the tool tracks pre- and post-market sentiment as well.
   

2023年10月12日

版本注释

V2
--- Minor Code Revision