Long-Term Capitulation Oscillator (LTCO, Diodato 2019)

Description:
This script is a faithful implementation of the Long-Term Capitulation Oscillator (LTCO) from Chris Diodato's award-winning 2019 CMT paper, "Making The Most Of Panic". It is a strategic, market-wide breadth and volume oscillator designed to identify major, long-term market bottoms.

What It Is
The LTCO combines long-term moving averages (34, 55, 89, 144, and 233-day) of NYSE advancing/declining issues and up/down volume. It uses a unique "average of averages" method to create a responsive yet strategic long-term indicator. This script plots the raw, un-normalized value as described in the paper, which typically oscillates in the 700-1100 range.

How to Interpret
The LTCO is a strategic tool for identifying potentially significant market turning points.

Extremely Low Readings: Suggest that a long-term period of selling has reached a point of exhaustion, potentially marking a major bear market low or a generational buying opportunity. The paper backtested various thresholds, with values below 950, 925, and especially 875 showing historically strong forward returns over the next 6-24 months.

Overbought/Oversold Lines: The script includes customizable overbought/oversold lines to help you visually identify these critical zones.

Settings
Data Sources: Allows toggling the use of "Unchanged" issues/volume data for the calculation.

Thresholds: You can set the overbought and oversold levels to your preference, based on the paper's findings or your own research.