CandelaCharts - Dip Index

📝 Overview

The Dip Index (DIPX) is a market breadth oscillator designed to identify market dips by measuring the percentage of assets within a chosen index or asset class that are trading above a specified moving average (such as the 50, 100, 150, or 200-period).

By highlighting when fewer assets remain above their averages, DIPX helps traders detect potential dip opportunities and assess overall market strength or weakness.

While commonly applied to equities, the indicator is adaptable to various financial instruments, including exchange-traded funds (ETFs), commodities, cryptocurrencies, and even fixed-income securities.

• Assess the overall health of a market by measuring internal participation in price moves.
  
• Detect overbought or oversold conditions when momentum becomes concentrated or overly extended.
  
• Generate actionable signals when the index exits extreme levels, suggesting renewed momentum or potential exhaustion.
  

📦 Features

• Multiple Indices: Supports SP500, Nasdaq, DJI, Russel2000, and sector-specific S&P indices.
  
• Dynamic MA Selection: Choose from SMA, EMA, RMA, WMA, VWMA with configurable lengths.
  
• Visual Customization: Full control over colors, line styles, text size, and branding.
  
• Signal Markers: Triangle markers appear when exiting overbought/oversold zones.
  
• Gradient & Background Fill: Visual highlighting of extreme market conditions.
  
• Overlay Mode Option: Can display OB/OS background as chart overlay.
  

⚙️ Settings

• Market: Chooses the index or asset class to measure.
  
• MA: Enables moving average filter; options include type (SMA, EMA, etc.) and period length.
  
• Oversold: Defines the lower threshold (default: 20) with customizable color.
  
• Overbought: Defines the upper threshold (default: 80) with customizable color.
  
• DIPX Line: Sets the thickness and color of the Dip Index line.
  
• Mode: Selects display type (Line, Cross, Circle, Stepline, etc.).
  
• Signals: Toggles buy/sell signal markers with customizable colors.
  
• OB/OS Zones: Enables highlighting of Overbought/Oversold zones.
  
• OB/OS Overlay: Toggles overlay shading for Overbought/Oversold zones.
  

⚡️ Showcase

Overbought/Oversold

Modes


Overbought/Oversold Zones

Signals

Overlay


📒 Usage

How to use DIPX effectively in trading and analysis, including interpretation, signal usage, strategic applications, and best practices.

DIPX outputs values from 0% to 100%, reflecting how widely participation extends across the underlying assets in an index or basket.

1. Assessing Market Health



Use DIPX to evaluate whether price moves are supported by broad participation:

• In a bull trend, confirm strength by checking if DIPX stays above 50%.
  
• In a bear trend, watch for rebounds in DIPX to spot temporary relief rallies.
  

2. Detecting Divergences



Divergence occurs when the price trend and DIPX trend disagree — often a precursor to reversal.

• Bearish Divergence: Price makes higher highs; DIPX makes lower highs -> Momentum weakening - potential top
  
• Bullish Divergence: Price makes lower lows; DIPX makes higher lows -> Selling pressure fading - potential bottom
  

How to Spot It:

• Overlay DIPX on the same chart as the index price.
  
• Use trendlines or horizontal markers to compare swing points.
  
• Focus on weekly or daily timeframes for reliability.
  

3. Signal-Based Entries/Exits

When enabled (Signals = true), DIPX generates triangle markers when exiting extreme zones:

• Bullish Triangle (▲): DIPX crosses above Oversold Value (e.g., 20%, 30%) -> Green upward triangle
  
• Bearish Triangle (▼): DIPX crosses below Overbought Value (e.g., 80%, 70%) -> Red downward triangle
  

4. Timeframe Guidance

• 1m – 4h: ❌ Not Recommended - DIPX uses daily-aggregated data;
  
• Daily (D): ✅ Strongly Recommended - Matches data frequency; clearest signals
  
• Weekly (W): ✅ Acceptable - Ideal for macro analysis and long-term positioning
  
• Monthly (M): ⚠️ Limited Use - Too slow for active trading; useful for big-picture context
  

By integrating DIPX into your analysis, you gain a powerful lens into market internals — helping you distinguish between broad-based strength and narrow leadership, regardless of asset class.

🚨 Alerts

The indicator does not provide any alerts!

⚠️ Disclaimer

These tools are exclusively available on the TradingView platform.

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