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MESA
Sine Wave Indicator
Description
The
MESA Sinewave indicator was developed by
recognized cycle specialist John Ehlers.
The MESA Sinewave indicator looks like a
sinewave when the market is in a cycle mode and
tends to wander when the market is in a trend
mode. The
MESA Sinewave indicator anticipates cycle mode
turning points rather than waiting for
confirmation as is done with most oscillators.
The MESA Sinewave indicator has the
additional advantage that trend mode whipsaw
signals are minimized.
The
Sine Wave indicator was introduced in the November
1996 issue of Technical Analysis of Stocks
& Commodities magazine.
Interpretation
The
MESA Sinewave indicator consists of two plots -
one displaying the Sine of the measured phase
angle over the time period parameter and the other
the Sine of the phase angle advanced by 45 degrees
(called the Lead Sine).
Together, the crossings of the Sine and
Lead Sine plots give clear advanced indication of
cycle mode turning points.
When
the MESA Sinewave indicator resembles an actual
sine wave, this suggests the market is in a cycle
mode. The
indicator lines are not well structured when the
market is in a trend mode.
A buy signal is given when the Sine plot
crosses above the Lead Sine plot.
A sell signal is given when the Sine plot
crosses below the Lead Sine plot.
An obvious advantage that the MESA Sinewave
indicator has over its “overbought/oversold”
counterparts is that it enters and exits much more
precisely without giving up a piece of the
market’s movement by waiting for confirmation.
When
the market is in a trend mode the MESA Sinewave
indicator does not resemble a sine wave.
In fact, the Sine and Lead Sine plots
typically languish in a sideways pattern around
zero, running somewhat parallel and distant from
each other. The
correct trading strategy in the trend mode is to
trade the trend. Basic
moving average crossovers are helpful for entering
and exiting positions in this type of market.
The
MESA Sinewave indicator is sensitive to using the
correct time period parameter.
You can use the Cycle Lines line study to
estimate the best time period to use.
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