Mass Index
Volatility & bands
Donald Dorsey's indicator looks not at direction but at the shape of the price ranges. When they widen, a reversal is approaching — regardless of which way it goes.
In its original form this indicator uses volume and/or the daily range (High/Low). The scanner only has closing prices and approximates those inputs (see the note at the bottom). So treat the absolute values as indicative; the direction and the crossings remain usable.
Construction & calculation
- Compute per day the range (high minus low) and its EMA(9).
- Divide that by the EMA(9) of that EMA — the 'double EMA ratio'.
- Add that ratio over 25 periods: that is the Mass Index.
ratio = EMA(range, 9) / EMA(EMA(range,9), 9)
Mass Index = sum of the ratio over 25 periods
Interpretation
- The classic pattern is called the Reversal Bulge: the index rises above 27 and then falls back below 26.5. At that moment a reversal is imminent.
- The Mass Index says nothing about the direction of that reversal. If the price was running up, expect a decline — and vice versa.
- Below 26.5 without a prior bulge there is no signal.
How the signal works in this scanner
Buy signal (green)Reversal Bulge completed (was above 27, then dropped below 26.5). The direction is inferred from the price move of the last 9 bars: if the price ran down, the scanner expects an upward reversal.
Sell signal (red)Reversal Bulge completed while the price rose over the last 9 bars: a downward reversal is expected.
Watch-outs & pitfalls
- The direction call is an addition of this scanner (Dorsey deliberately left it open). So treat the bull/bear color with a grain of salt and look at the trend yourself.
- Requires at least 50 trading days.