(1) What is ( MSI )
( MSI ) is a breadth indicator derived the (MO),
which is a breadth indicator based on Net Advances (advancing issues less declining issues).
The Summation Index is simply a running total of the values.
To identify the market direction, I prefer to use the ( ) of MSI rather than MSI itself
because MSI is a summation so it's difficult to compare with previous market patterns. So I use applied MSI .
Reference: Stockcharts.com has a nice set of detailed explanation about MSI .
(2) How to use this script
- Add this script to your chart.
- You can choose one of two options ("MSI RSI" or "MO").
- You can also choose the market from three options ("Nasdaq", "NYSE", "Nasdaq+NYSE")
(3) "MSI RSI" or "MO"
a) "MSI RSI"
For swing trade(sevelal weeks), MSI is much better to identify the broad market direction.
I backtested last several years of S&P500 . The result was not symmetrical between MT bear/bull market.
For bull side, when MSI curls up from the bottom(e.g. 30 level), 90% of times out of them the market rallied.
For bear side, when MSI rolles over to downside from the top(e.g. 70 level), only 60% of times out of them the market declined.
So the market tends to hit negatively diverrgent high from advancing/declining issues perspective. Be careful to use MSI oscilator.
For short term trade(intraday, 2-3 days of holding), MO is better because MSI is a summation so lags several days. MO is quick.
MO is sometimes very noisy, so you need to draw or horizontal levels to compare with the previous cases.
For beginners, I recommend to use "MSI RSI".