STIX is a short-term trading oscillator that was
published in The Polymetric Report. It compares the amount of volume
flowing into advancing and declining stocks.
Interpretation
According to The Polymetric Report:
STIX usually ranges between +42 and +58.
If STIX gets as low as 45, the market is almost
always a buy, except in a raging bear market.
The market is fairly overbought if STIX rises to
56; and except in a new bull market, it's wise to sell if STIX should
go over 58.
Traders and investors should modify these rough
rules to suit their own objectives.
In normal markets, STIX rarely gets as high as 56
or as low as 45, so rigid use of these rules of thumb would keep you
inactive most of the time. For active accounts, the rules might be
made much less stringent.
Table 13
Extremely Overbought
greater than 58
Fairly Overbought
greater than 56
Fairly Oversold
less than 45
Extremely Oversold
less than 42
Example
The following chart shows the S&P 500 and the STIX
indicator.
I drew "buy" arrows when the STIX fell below, and
the rose above, the oversold level of 45. I drew "sell" arrows when the
STIX rose above, and then fell below, the overbought level of 56.
Calculation
STIX is based on a variation of the Advance/Decline
Ratio:
The STIX is a 21-period (i.e., 9%) exponential
moving average of the above A/D Ratio:
