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Expansion Index main page -
Range Expansion
Index (REI)
The Range
Expansion Index is an arithmetically calculated market-timing
oscillator designed to overcome problems with exponentially
calculated oscillators.
Overview
Developed
by Tom DeMark, this is a more precise indicator of
trends and trading signals than exponential oscillators,
such as MACD.
- REI eliminates short
term irregularities by comparing current prices
with the prices two days previous
- REI works only in
trending periods
- DeMark included conditions
to eliminate premature signals
Interpretation
The REI
oscillator typically produces values of -100 to +100
with 45 or higher indicating overbought conditions
and -45 or lower indicating oversold conditions. DeMark
advises against trading in extreme overbought or oversold
conditions indicated by six or more bars above or
below the +/-45 thresholds.
When conditions
aren't met, the day's value is zero.
- REI values range from
-100 to + 100
- If the REI is in the
overbought or oversold area for less than five
consecutive periods, you can expect at least a
minor reversal
- The signal is unreliable
if it stays above or below these levels for more
than five periods. REI must then return to the
neutral zone (between +45/-45) before giving a
reversal signal outside the zone.
Signals
- Overbought
- REI greater than + 45
- Oversold -
REI below -45
Trading should
be avoided when:
- Overbought for six
or more periods above +45
- Oversold for six or
more periods below - 45.
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