To anyone unfamiliar with KST, it is a cousin of RSI. Basically, this indicator is analyzed like we would analyze charts using Stochastic RSI. It is basically an "energy oscillator".
This indicator considers price with the theory of relativity.
Relativity works this way: A downward moving MACD means that price velocity is slowing down. An upward moving one means that price is accelerating.
KST-Based MACD is all about relative performance. Exponential charts behave identically to horizontal ones. Compare SPX and SPX/CURRCIR and see for yourself.
Just like the classic MACD, bear/bull signals appear on the histogram. A band is drawn around the MACD, which is useful to pinpoint overbought/oversold conditions / squeezes. It is also very useful for pinpointing / confirming divergences.
Tread lightly, for this is hallowed ground. -Father Grigori
P.S. This is version 2 of the original one. Custom formulae are used all around this indicator. Basically, every formula has been reimagined for it to work in super-long-term timeframes. This indicator, compared to the previous one, doesn't ignore any chart data. It takes every single candle into consideration.
P.S.2. Pro tip: Use two separate windows, one with KST-MACD and one with KST-Histogram, just like in the cover.
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Simplified code and fixed initial values. Before: After:
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Minor fixes.
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New custom ribbon
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Now named KSTM Delta. This new version works using a new, beautiful, KST-Based MACD hybrid. Removed bands. Not useful in my opinion...
You may add two copies of the indicator on your charts, the top one with default values, the bottom one with x2 the values. (Tip on indicators: timeframes must verify one another)
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Cleaned up this mess of a placebo. It is now an actual indicator. Not based on KST anymore.
The S+P "Exponential" Chart alone, is worth the price of admission here. Thank you very much for the information. Not surprising that the long term uptrend line shown on the chart is near the 1570 area the prior all time high, and after it broke to the upside from there,.. it has never looked back.
akikostas
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@The_Unwind, Thank you, it really is an incredible chart!!! I am constantly rethinking on how the stock market behaves, and how to better manage psychology when the fundamentals of the economy begin to weaken/deteriorate. Not all is black and white... It is easy to be white, easy to be black. But is very hard to describe the gray color!
akikostas
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@The_Unwind, It is interesting to see the baseline SPX rate-of-change between periods: 1871 - 1954 : 1.88% per year 1936 - 1996 : 6.70% per year 1983 - 2023 : 7,50% per year (I am intentionally reusing some years)
Bitcoin 2013 - 2023 : 82% per year
In a period where Bitcoin exists, how can equities remain competitive? Do note that KST concludes that SPX has been actually underperforming for the last 20 years. We are moving quite slow in relative terms...
In a sense, we are continuously finding ways to make more and more money, and faster every time. Will this time be different?
Extra charts:
P.S. If you like this indicator, I have it uploaded and I can fix it for you. Ask me if you want.
Karolis3333
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always appreciate your contrarian perspectives supported by data. I'm still a little confused on how to interpret the meaning on the blue line on the KST-MACD indicator (let's say the blue line is in deep negative territory, does it means that the stock price has a long term negative underperformance?). Keep it up!
akikostas
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@Karolis3333, The light-blue line should be interpreted like you would analyze the Stochastic RSI indicator. The blue line is basically an oscillator. When it begins an upwards move (histogram turning white from red, and blue line moving up) it signals increased relative performance in markets. A downwards move signals decreased relative performance.
SPX is exponential. It technically always increases. The point of long-term analysis is to get absolute price out of the equation, and analyze it in relative terms.
Price: Fast, slow, fast, slow, fast Blue line: Up, down, up, down, up Histogram: White-Green, White-Red, White-Green, White-Red, White-Green
Blue line up is fast, blue line down is slow. The zero line can serve as a break-even point.
If blue line is too high, it means that it can have a hard time moving upwards again. Blue line always seeks the zero line. The bands serve as "resistance". The closer to the band, the higher the resistance.
As for the deep negative value, you got it right. It signals that SPX since 2013 has underperformed. Why? Because we had some violent drops, two in 2018, one in 2020 and one in 2022. Since 2000 SPX has had a very bumpy ride. Bumpiness is imprinted in KST.
Parimal_S
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thank you
akikostas
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Yeah I posted the charts upside down... Before: After:
Not surprising that the long term uptrend line shown on the chart is near the 1570 area
the prior all time high, and after it broke to the upside from there,.. it has never looked back.