Sunday, July 17, 2011


Ichimoku is one of the widely used Japanese trading systems. At its heart is the idea of two moving averages that are plotted with their origins shifted forward in time by different amounts. The price space between the two moving averages is a "cloud" and trades are indicated by price movements wrt the cloud.

In a similar way it is possible to play the Ichimoku game with seasonal projections by anchoring two sdi_seapro5 studies on different dates. Here's a picture of what I'm talking about:

The two projections are both the average of the last 5 one-year seasons but anchored on two different dates. The blue line is anchored 10 bars back and the magenta line is anchored on the most recent close. The separation of the two projections is a measure of divergence. A narrow channel indicates an equity that is marching in-step with its season. A wide channel indicates an equity that is diverging from its season. The separation between the two projections at a date in the future might be taken as a continously refined range prediction of future price (grey circle.) This projection has the SPX hitting the August expiration between 1342 and 1368.

Following the the Ichimoku model further, one might alter the season length of one of the projections to create cross-overs and seasonal clouds. A seasonal trading system might then be created Ichimoku-style. Hmm, I think this will be the subject of a future blog ...


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