MacroVar Bubble Risk model
MacroVar Bubble Risk model (B)
MacroVar bubble model monitors a financial asset’s price relative to its 252-day moving average to identify possible inflection point.
Extreme moves often followed by price reversals have a high probability of occuring when MacroVar bubble indicator is greater than 2.5 or less than -2.5.
The MacroVar bubble model is calculated using the formula:
Latest Price – (252-day Moving Average) / (252-day Standard Deviation).
It represents a z-score and extreme values are greater than 2.5 and less than -2.5. Other thresholds include -3, +3. Value is higher than +2.5 or lower than -2.5 meaning that there is a moderate possibility of price reversal from the current trend. Value is higher than +3 (when Momentum and Trend is +100) or -3 (when Momentum and Trend is -100) meaning that there is a very high probability of price reversal from the current trend.