Valuation Tool ( Indicator )

VALUATION (Intermarket Relative Strength Index)

Overview The Valuation indicator is a sophisticated intermarket analysis tool designed to identify overvalued or undervalued conditions of an asset relative to its key correlated benchmarks. By comparing the percentage change of a base symbol against three different external assets (e.g., DXY, Gold, Bonds), the script highlights significant price-value divergences.

Originality & Utility Unlike standard RSI or momentum oscillators that only look at a single asset's price, this script provides a "Fair Value" perspective based on intermarket relationships:

Dynamic Correlation Tracking: It calculates the differential in percentage change between the main chart and three user-defined symbols.

Normalized Comparative Output: Uses a custom Rescale Function that translates raw performance differences into a normalized scale (-100 to +100), making it easy to spot historical extremes.

Custom Correlation Matrix: Traders can adapt the indicator to any asset class (Equities vs. Yields, FX vs. Commodities, etc.), providing a high degree of versatility for macro-thematic trading.

Indicator vs. Strategy Version Please note that THIS IS THE INDICATOR VERSION designed for visual analysis and identifying potential reversal zones. A dedicated BACKTESTING VERSION for quantitative validation is available in my script profile.

Collaboration & Feedback I am focused on refining intermarket models. If you have suggestions on default correlation baskets or logic improvements, please reach out. Support the project by HITTING THE BOOST BUTTON—it helps me continue sharing these tools.

How it Works

Performance Delta: The script measures the percentage change over a 'Period Length' for the main symbol and three comparison IDs (Default: DXY, Gold, 30Y Bonds).

Calculation of Divergence: It subtracts the benchmark's performance from the asset's performance. A positive result means the asset is outperforming the benchmark; a negative result means underperformance.

Rescaling: The raw divergence is normalized over a 'Rescale Length' (default 100 bars) to create a visual oscillator.

How to Use It

Overvalued (+75 Level): When the lines reach the upper dashed threshold, the asset has significantly outperformed its benchmarks, suggesting it may be "expensive" and due for a mean reversion or correction.

Undervalued (-75 Level): When the lines drop below the lower threshold, the asset has lagged significantly behind its correlations, indicating a potential "cheap" entry point.

Convergence/Divergence: Watch for all three lines to align at an extreme. Triple alignment at +/- 75 provides a high-probability signal of intermarket exhaustion.

RISK DISCLOSURE Trading involves substantial risk. Intermarket relationships can decouple during periods of high volatility or fundamental shifts. Past correlations do not guarantee future results. This tool is for informational purposes and should be used as part of a comprehensive trading plan.