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CoffeeShopCrytpo Dynamic PPI
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In the financial world, the Producer Price Index (PPI) is often used to measure how domestic products are performing over time, indicating the health of the market. Domestic products refer to goods and services that are produced within a specific country’s borders. However, in this indicator, we’ve taken that idea and applied it directly to financial assets, allowing traders to see how an asset is performing relative to its own base value over a given period of time.
Here, the asset’s base value is represented as 100%. When the asset performs above 100%, it's considered to be in a buyer's market—indicating strength and demand. Conversely, if the value dips below 100%, it's operating below its base value, signaling a potential seller's market.
Why This Matters:
This indicator not only converts an asset’s performance into a PPI-style calculation, but it also visualizes price movements as price candles. This dual perspective is crucial, because even if the asset’s performance is over 100%, the closing price might still fall below that threshold—adding nuance to your understanding of market conditions.
Key Features of the Indicator:
Bullish and Bearish Convergence Levels: These levels show whether the market leans bullish or bearish. If the Bullish Convergence level is higher than the Bearish one, the market is bullish, and vice versa. Importantly, these levels can signal shifts in market strength, regardless of where the PPI candles are positioned.
If Bullish Convergence is rising below Bearish, the bearish market is weakening and bullish pressure is growing. Conversely, if Bearish Convergence is falling above Bullish, the bearish side is losing ground.
Market Strength Visualizations:
Strong Bullish Market: Bullish Convergence is higher than Bearish, and it’s still rising.
Strong Bearish Market: Bearish Convergence is above Bullish, and it's climbing.
Weak Bullish Market: Bullish Convergence is above Bearish, but the PPI closes below Bullish Convergence.
Weak Bearish Market: Bearish Convergence is above Bullish, but the PPI closes above Bullish Convergence
Pullbacks:
Bullish Pullback: In a strong bullish market, the PPI shows lower closes below the Bullish Convergence.
Bearish Pullback: In a strong bearish market, the PPI shows higher closes above the Bullish Convergence.
Divergences:
Higher Price, Lower or Flat PPI: This indicates that while the asset’s price is rising, its underlying performance (relative to the PPI’s 100% base level) is not keeping up. Essentially, the asset is reaching new price highs, but its strength or "efficiency" of growth is weakening.
The PPI is designed to show the "return" of an asset's performance relative to its historical movement, so when it lags behind price, it suggests that the price rise may not be sustainable.
When you observe the first high of the PPI level above the bullish convergence level, followed by a second high of the PPI below the bullish convergence level in a bullish market, this creates a divergence.
Example of Divergence in image:
1. First High of PPI Above the Bullish Convergence Level:
This suggests strong bullish momentum. The asset’s performance, as measured by the PPI, is in line with or even outperforming price expectations, indicating the market is experiencing a robust bullish trend. The fact that the PPI level is above the bullish convergence line means that the asset is operating well above its base performance (above 100%) and bullish momentum is clearly dominant.
2. Second High of PPI Below the Bullish Convergence Level:
This marks a potential weakening of the bullish momentum. Although the market is still in a bullish state (since bullish convergence remains above bearish), the PPI failing to reach the bullish convergence level suggests that the asset’s performance is not keeping pace with price action or is underperforming relative to its earlier high.
The fact that this occurs while the market is still bullish (bullish convergence is greater than bearish) can signal a possible pullback or a temporary consolidation phase within the larger bullish trend.
What does a divergence mean:
Momentum Weakening: The second high of the PPI being below the bullish convergence line suggests that while prices may still be increasing, the strength behind the move is fading. The asset is not performing as strongly as it did during the first high, and the market’s confidence or momentum might be softening.
Potential Bullish Pullback: This could indicate that a pullback or correction within the larger bullish trend is underway. Traders might be taking profits, or buyers could be losing enthusiasm, causing the asset to stall temporarily. However, because the overall market remains bullish, this doesn’t necessarily mean a full reversal—just a cooling off period.
Caution in New Long Positions: If you see this divergence, it could be a sign to be more cautious about opening new long positions. It suggests that the asset may need to consolidate or correct before resuming its upward trend, and it’s worth waiting for confirmation of renewed momentum before jumping back in.
ATR Settings
Youll notice there are two ATR settings. One for short term and one for long term.
These values are based on your preferential strategy for what you consider to be long and short term.
The final ATR values are calculated against eachother and applied to the Volatility Label at the end of price.
This label shows you the current ATR as well as the previous candle ATR.
Why this is important:
If the short term ATR is greater than the long term ATR, then volatility is rising in the short term greater than the long term.
This gives your label a value greater than 1.0. This means the short term trend is about to move.
If the long term ATR is greater than the short term ATR, there is no volatility in the short term and only long term exists.
This gives you a value of less than 1.0. This means no volatility or ranging market in the short term.
Here, the asset’s base value is represented as 100%. When the asset performs above 100%, it's considered to be in a buyer's market—indicating strength and demand. Conversely, if the value dips below 100%, it's operating below its base value, signaling a potential seller's market.
Why This Matters:
This indicator not only converts an asset’s performance into a PPI-style calculation, but it also visualizes price movements as price candles. This dual perspective is crucial, because even if the asset’s performance is over 100%, the closing price might still fall below that threshold—adding nuance to your understanding of market conditions.
Key Features of the Indicator:
Bullish and Bearish Convergence Levels: These levels show whether the market leans bullish or bearish. If the Bullish Convergence level is higher than the Bearish one, the market is bullish, and vice versa. Importantly, these levels can signal shifts in market strength, regardless of where the PPI candles are positioned.
If Bullish Convergence is rising below Bearish, the bearish market is weakening and bullish pressure is growing. Conversely, if Bearish Convergence is falling above Bullish, the bearish side is losing ground.
Market Strength Visualizations:
Strong Bullish Market: Bullish Convergence is higher than Bearish, and it’s still rising.
Strong Bearish Market: Bearish Convergence is above Bullish, and it's climbing.
Weak Bullish Market: Bullish Convergence is above Bearish, but the PPI closes below Bullish Convergence.
Weak Bearish Market: Bearish Convergence is above Bullish, but the PPI closes above Bullish Convergence
Pullbacks:
Bullish Pullback: In a strong bullish market, the PPI shows lower closes below the Bullish Convergence.
Bearish Pullback: In a strong bearish market, the PPI shows higher closes above the Bullish Convergence.
Divergences:
Higher Price, Lower or Flat PPI: This indicates that while the asset’s price is rising, its underlying performance (relative to the PPI’s 100% base level) is not keeping up. Essentially, the asset is reaching new price highs, but its strength or "efficiency" of growth is weakening.
The PPI is designed to show the "return" of an asset's performance relative to its historical movement, so when it lags behind price, it suggests that the price rise may not be sustainable.
When you observe the first high of the PPI level above the bullish convergence level, followed by a second high of the PPI below the bullish convergence level in a bullish market, this creates a divergence.
Example of Divergence in image:
1. First High of PPI Above the Bullish Convergence Level:
This suggests strong bullish momentum. The asset’s performance, as measured by the PPI, is in line with or even outperforming price expectations, indicating the market is experiencing a robust bullish trend. The fact that the PPI level is above the bullish convergence line means that the asset is operating well above its base performance (above 100%) and bullish momentum is clearly dominant.
2. Second High of PPI Below the Bullish Convergence Level:
This marks a potential weakening of the bullish momentum. Although the market is still in a bullish state (since bullish convergence remains above bearish), the PPI failing to reach the bullish convergence level suggests that the asset’s performance is not keeping pace with price action or is underperforming relative to its earlier high.
The fact that this occurs while the market is still bullish (bullish convergence is greater than bearish) can signal a possible pullback or a temporary consolidation phase within the larger bullish trend.
What does a divergence mean:
Momentum Weakening: The second high of the PPI being below the bullish convergence line suggests that while prices may still be increasing, the strength behind the move is fading. The asset is not performing as strongly as it did during the first high, and the market’s confidence or momentum might be softening.
Potential Bullish Pullback: This could indicate that a pullback or correction within the larger bullish trend is underway. Traders might be taking profits, or buyers could be losing enthusiasm, causing the asset to stall temporarily. However, because the overall market remains bullish, this doesn’t necessarily mean a full reversal—just a cooling off period.
Caution in New Long Positions: If you see this divergence, it could be a sign to be more cautious about opening new long positions. It suggests that the asset may need to consolidate or correct before resuming its upward trend, and it’s worth waiting for confirmation of renewed momentum before jumping back in.
ATR Settings
Youll notice there are two ATR settings. One for short term and one for long term.
These values are based on your preferential strategy for what you consider to be long and short term.
The final ATR values are calculated against eachother and applied to the Volatility Label at the end of price.
This label shows you the current ATR as well as the previous candle ATR.
Why this is important:
If the short term ATR is greater than the long term ATR, then volatility is rising in the short term greater than the long term.
This gives your label a value greater than 1.0. This means the short term trend is about to move.
If the long term ATR is greater than the short term ATR, there is no volatility in the short term and only long term exists.
This gives you a value of less than 1.0. This means no volatility or ranging market in the short term.
Sürüm Notları
"Show PPI Level"Added in a feature that allows you to view the PPI level or just the PPI as candles.
Sürüm Notları
Added functions:Show / Hide Producer Price Index Level
Show / Hide Producer Price Index Level Candles
Use can change PPI Line Width from 1px to 4px
Turn Convergence Levels ON / Off
Activate fill of Convergence Channels
Additional Levels added to each Convergence line noting breakout area
Ability to alter Label and or Label Text Color
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