Warp, good question. I've been looking at ADX for close on 2 years now, so this is a good opportunity to dig up the official definitions!
From Stockcharts:
ADX is an oscillator that fluctuates between 0 and 100. Even though the scale is from 0 to 100, readings above 60 are relatively rare. Low readings, below 20, indicate a weak trend and high readings, above 40, indicate a strong trend. The indicator does not grade the trend as bullish or bearish, but merely accesses the strength of the current trend. A reading above 40 can indicate a strong downtrend as well as a strong uptrend.
My observations:
Technical buy and sell signals occur at the crossovers of the +DI and -DI. However in the current market, I'm finding more and more that they don't confirm.
So what I find more accurate, is where the lower indicator hits bottom. Normally a reading of 10 to 15 would be good but at the moment the market seems to need a reading lower than 10.
I've also found you can get some residual selling afterwards, i.e. it sometimes acts as a leading indicator.
Also, the position of the black ADX line is important. It usually is a good reversal indicator when it tops out above 40, but can lag the -DI by a couple of days. However, if the black ADX line is very low (<20), I wouldn't place too much reliance on the +DI and -DI components.
This is illustrated in this tlab chart, which incidentally also shows how the green-red crossover is currently unreliable. Note how the black line was a good coincident signal when it topped at 40:
stockcharts.com[e,a]dbclyyay[dc][pf][vc60][iut!Ll14]&pref=G
Now look at the weekly $SPX. It tells me that my timing might not be 100%, but a reversal isn't far off either:
stockcharts.com[e,a]wbclyyay[pf][vc60][iut!Ll14]&pref=G
So, in answer to your question, it can be used for general market indicators as well as stocks, and across all time periods.
Also, that's a good observation about the red line not being as high as it was at previous bottoms. I don't think ADX should be used as an absolute and needs to be confirmed by other signals as well. All I can say is that it will turn around soon.
pvz |
