Dr. Z,
In the example you are referring to, ADX is not 'at variance' at all with the price action.
Its important to remember that ADX is a trend strength indicator, it is not a trend direction indicator. So in this example, ADX is rising sharply, and when we see ADX rising sharply from relative lows, we expect to see price action confirming that a new trend has emerged.
ottographs.com
As you can see in the above updated swing chart, ADX declined from mid January through to the end of Feb as price climbed and then churned in an ever tightening range.
As Teresa has pointed out in the past here, ADX doesn't measure whether something is moving up or down. Many indicators are like that, ADX requires a little more thinking.
Climbing ADX means the trend is strengthening, and remember that trends can be up and down!
Declining ADX means the trend is weakening. Frequently we can use the decline from a peak ADX value to help identify where a consolidation pattern begins and ends, much as I have done in the above posted example.
I hope this helps,
Mike |
