In earlier posts I demonstrated the strong rhymes generated by the G-125 score.
Here is the secret recipe to generating the G-125 score.
Eight moving averages are used; 8-week, 13-week, 21-week, 34-week, 55-week, 89-week, 144-week, and 233-week. Each moving average is .618 in length to the longer one. This is accomplished using the Fibonacci sequence, which adds the prior two numbers in the sequence to generate the next number. This is known as the golden ratio, thus the name Golden-125.
The shortest moving average (8-week) is compared to the seven longer averages and one point is earned for every time the shorter moving average exceeds the longer average. The second shortest moving average (13-week) is compared to the six longer averages, earning two points. This progression continues using a Fibonacci sequence of increasing points (1,2,3,5,8,21).
A table demonstrating the points earned follows:
8-wk compared to 7 longer averages (7 x 1) = 7 pts
13-wk compared to 6 longer averages (6 x 2) = 12 pts
21-wk compared to 5 longer averages (5 x 3) = 15 pts
34-wk compared to 4 longer averages (4 x 5) = 20 pts
55-wk compared to 3 longer averages (3 x 8) = 24 pts
89-wk compared to 2 longer averages (2 x 13) = 26 pts
144-wk compared to 1 longer average (1 x 21) = 21 pts
The longer averages are weighted heavier as it is more significant when longer moving averages change positions, rather than the more easily moved shorter moving averages.
This is easily accomplished in an Excel spreadsheet that has the weekly closing prices of the Dow and NASDAQ.