Some of the older members might remember I used to have a “Bullish Meter” chart that I posted some times, I shouldn’t have stopped using it. Because if I had considered it before making some of my resent IFTs, I might have not made them when I did.
I use the Keltner Channels for this interpretation of Bullishness.
The Keltner Channel was developed by Chester Keltner, a well-known commodity trader, in the early 1960s. This volatility-based indicator makes use of the “envelope theory.” Envelope theory states that the market price will generally fall between the boundaries of the envelope (or channel). Where price is within the band is a way to identify overbought and oversold conditions. When a market’s price is close to the upper band, the market is considered overbought. Conversely, when a market’s price is close to the bottom band, the market is considered oversold.
The Keltner channel is not as well-known as other channel methods, such as the Bollinger Bands. An advantage of Keltner Channel is that market lag is not as pronounced because Keltner Channels are extremely sensitive to fluctuations in volatility.
For this examination, I set the Keltner channels at 3.0 times the 20-day moving average daily range, centered around the 20-period exponential moving average. This is wide enough so that it contains 95 percent of the price action.
However, be aware that overbought and oversold markets can last for an extended periods. They will test your patience. So like all other indicators, don’t rely on this alone.
The 'reading' as of Friday's close was 56.22. I set the colors for:
0-70 Green = OK,
70-85 Yellow = Caution,
85-100 Red =Overbought.