7 out of the last 10 times that the “PMO Buy All” indicator got to 100, it led to a short term correction in the general indices. In the chart I have annotated above, I show the PMOBUYALL in red/black, the S&P 500 in the background (all black line) and vertical blue lines to note the 100 reads on the PMOBUYALL.
While all indicators should be used as barometers, not crystal balls, it is helpful to have a handful of them working in the background at all times so that you can measure extremes (to be heeded or to be ignored). 7 out of 10 hit ratio indicates it’s time to at least pay attention.
The Price Momentum Oscillator (PMO) on an individual stock, is an oscillator based on a Rate of Change (ROC) calculation that is smoothed twice with exponential moving averages that use a custom smoothing process. Because the PMO is normalized, it can also be used as a relative strength tool. Stocks can thus be ranked by their PMO value as an expression of relative strength.
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