The Market Sentiment Technicals indicator synthesizes insights from diverse technical analysis techniques, including price action market structures, trend indicators, volatility indicators, momentum oscillators, and more.

The indicator consolidates the evaluated outputs from these techniques into a singular value and presents the combined data through an oscillator format, technical rating, and a histogram panel featuring the sentiment of each component alongside the overall sentiment.

USAGE

The Market Sentiment Technicals indicator is a tool able to swiftly and easily gauge market sentiment by consolidating the individual sentiment from multiple technical analysis techniques applied to market data into a single value, allowing users to asses if the market is uptrending, consolidating, or downtrending.

The tool includes various components and presentation formats, each described in the sub-sections below.

Indicators Sentiment Panel

The indicators sentiment panel provides normalized sentiment scores for each supported indicator, along with a synthesized representation derived from the average of all individual normalized sentiments.

Market Sentiment Meter

The market sentiment meter is obtained from the synthesized representation derived from the average of all individual normalized sentiments. It allows users to quickly and easily gauge the overall market sentiment.

Market Sentiment Oscillator

The market sentiment oscillator provides a visual means to monitor the current and historical strength of the market. It assists in identifying the trend direction, trend momentum, and overbought and oversold conditions, aiding in the anticipation of potential trend reversals.

Divergence occurs when there is a difference between what the price action is indicating and what the market sentiment oscillator is indicating, helping traders assess changes in the price trend.

DETAILS

The indicator employs a range of technical analysis techniques to interpret market data. Each group of indicators provides valuable insights into different aspects of market behavior.

Momentum Indicators

Momentum indicators assess the speed and change of price movements, often indicating whether a trend is strengthening or weakening.

• Relative Strength Index (RSI): Measures the magnitude of recent price changes to evaluate overbought or oversold conditions.
• Stochastic %K: Compares the closing price to the range over a specified period to identify potential reversal points.
• Stochastic RSI Fast: Combines features of Stochastic oscillators and RSI to gauge both momentum and overbought/oversold levels efficiently.
• Commodity Channel Index (CCI): Measures the deviation of an asset's price from its statistical average to determine trend strength and overbought and oversold conditions.
• Bull Bear Power: Evaluates the strength of buying and selling pressure in the market.

Trend Indicators

Trend indicators help traders identify the direction of a market trend.

• Moving Averages: Provides a smoothed representation of the underlying price data, aiding in trend identification and analysis.
• Bollinger Bands: Consists of a middle band (typically a simple moving average) and upper and lower bands, which represent volatility levels of the market.
• Supertrend: A trailing stop able to identify the current direction of the trend.
• Linear Regression: Fits a straight line to past data points to predict future price movements and identify trend direction.

Market Structures

• Market Structures: Analyzes the overall pattern of price movements, including Break of Structure (BOS), Market Structure Shifts (MSS), also referred to as Change of Character (CHoCH), aiding in identifying potential market turning and continuation points.

The Normalization Technique

The normalization technique employed for trend indicators relies on buy-sell signals. The script tracks price movements and normalizes them based on these signals.

normalize(buy, sell, smooth)=>
    var os = 0
    var float max = na
    var float min = na
    os := buy ? 1 : sell ? -1 : os
    
    max := os > os[1] ? close : os < os[1] ? max : math.max(close, max)
    min := os < os[1] ? close : os > os[1] ? min : math.min(close, min)

    ta.sma((close - min)/(max - min), smooth) * 100

In this Pine Script snippet:

• The variable os tracks market sentiment, taking a value of 1 for buy signals and -1 for sell signals, indicating bullish and bearish sentiments, respectively.
• max and min are used to identify extremes in sentiment and are updated based on changes in os. When market sentiment shifts from buying to selling (or vice versa), max and min adjust accordingly.

Normalization is achieved by comparing current price levels to historical extremes in sentiment. The result is smoothed by default using a 3-period simple moving average. Users have the option to customize the smoothing period via the script settings input menu.

SETTINGS

Generic Settings

• Timeframe: This option selects the timeframe for calculating sentiment. If a timeframe lower than the chart's is chosen, calculations will be based on the chart's timeframe.
• Horizontal Offset: Determines the distance at which the visual components of the indicator will be displayed from the primary chart.
• Gradient Colors: Allows customization of gradient colors.

Indicators Sentiment Panel

• Indicators Sentiment Panel: Toggle the visibility of the indicators sentiment panel.
• Panel Height: Determines the height of the panel.

Market Sentiment Meter

• Market Sentiment Meter: Toggle the visibility of the market sentiment meter (technical ratings in the shape of a speedometer).

Market Sentiment Oscillator

• Market Sentiment Oscillator: Toggle the visibility of the market sentiment oscillator.
• Show Divergence: Enables detection of divergences based on the selected option.
• Oscillator Line Width: Customization option for the line width.
• Oscillator Height: Determines the height of the oscillator.

Settings for Individual Components

In general,

• Source: Determines the data source for calculations.
• Length: The period to be used in calculations.
• Smoothing: Degree of smoothness of the evaluated values.

Normalization Settings - Trend Indicators

• Smoothing: The period used in smoothing normalized values, where normalization is applied to moving averages, Bollinger Bands, Supertrend, VWAP bands, and market structures.

LIMITATIONS

Like any technical analysis tool, the Market Sentiment Technicals indicator has limitations. It's based on historical data and patterns, which may not always accurately predict future market movements. Additionally, market sentiment can be influenced by various factors, including economic news, geopolitical events, and market psychology, which may not be fully captured by technical analysis alone.