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PMO Time Frame Relationships?

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Webinar Question:  Does a reversal in the daily PMO (Price Momentum Oscillator) have any effect on the PMO on weekly and monthly charts?

Carl's Answer:  PMOs for the daily, weekly, and monthly time frames, while calculated with the same formula, are essentially different indicators. They are different because different data sets are used to calculate each one. The daily PMO is calculated using daily closing data, the weekly PMO uses weekly data, and the monthly PMO uses monthly data. The PMO in one time frame has no effect on the PMO in another time frame. It is price movement that affects the resulting PMO. Let's look at three charts covering a three-year period and using the different time frames.


The daily PMO is the most active because there are approximately 720 data points being used for the PMO calculation. (240 market days per year times 3.)

The weekly PMO is much smoother because it is derived from only 156 data points.

Finally, the monthly PMO uses only 36 data points for the three-year period.

While we are only discussing the PMO here, the important point to be made is that all price indicators are calculated on this basis--a single formula is applied to data from different time frames. The use of weekly and monthly data smooths the price index as well as the the indicator which is calculated from the smoothed price data.


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Technical analysis is a windsock, not a crystal ball.


 

Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of DecisionPoint.com, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor. Learn More
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