THE BIG IDEA
This past week we were alerted to one of the more obscure indicators out there. Let’s meet the Choppiness Index.
It was created by an Australian commodities trader named E.W. Driess. The idea behind it is not specific to the commodities markets and can be used also for stocks, crypto, or other asset classes.
The Choppiness Index is the mortal enemy of the “breadth thrust”, a concept we will likely cover in a future edition of The Prime Wave. It was designed to tell us how much a market is just zig-zagging in place relative to a possible trend.
The reason this indicator came to our attention is because the Choppiness Index as applied to the S&P 500 was recently at a multi-decade low. An extremely low choppiness reading is not surprising, since the last several weeks has seen the market spring up like a teenage boy getting his first glimpse at Playboy.
It might also help us to understand what comes next. Or not.
A very low value can tell us that a trend is probably close to reaching its end. The index has nothing to offer us in terms of whether that means an immediate reversal of the trend or simply a flat, “choppy” phase.
Likewise, a high “choppiness” condition will precede a new trend. But in which direction? That is really what is important to us, isn’t it? Unfortunately, you will need to use other information to make your guess about that.
By now, you may be wondering how to calculate the index.
There are two important numbers to find. We’ll assume the standard 14 periods.
Total True Range = Sum the 14 individual true ranges (or take the average true range * 14)
Price Range = Highest High - Lowest Low of the 14 periods
Then you calculate the index like so:
Choppiness Index = 100 * log10(Total True Range / Price Range) / log10(14)
If you want to play around with the formula, you could try using different look-back periods besides the default setting of 14. You could also come up with your own definitions of what counts as “high” and “low” choppiness. Driess was apparently a Fibonacci fan and used 61.8 and 38.2 although those specific numbers have no particular meaning within the indicator.
For us, the Choppiness Index does not really tell us much that we could not already figure out just by looking at a chart with our own eyes. The index does help us to recognize just how historic recent trading activity has been.
SEEN ON THE INTERNETS
This week’s Seen On The Internets is about something we are not seeing.
Often times, around the time of climactic selloffs you will see declining stocks outnumbering advancing stocks by a 10:1 ratio or more and/or a similarly big ratio of advancers to decliners when the market decides the selloff is over.
In this post on social media, Andrew Thrasher, CMT shows us that we have not yet seen such a day in 2026. The market has “remained fairly calm” in his estimation. He provided the chart copied below in his post.
Perhaps the market is a little too calm. Maybe we will revisit the good-old-days of the 2022 bear market, which contained numerous 10:1 days.
NUMBERS ONLY
18 | The iShares Semiconductor ETF, or SOXX, has risen 18 days in a row and is up 40.45% for the month. |
23.60% | Intel has done its part to contribute to the performance of SOXX. Shares of INTC were up 23.60% on Friday after an optimistic report from the company. |
- 8.48% | Shares of IBM, another leader from the previous generation, were not so fortunate. The stock was down 8.48% last week. |
SWINGEX INDEX
As of market close on: 24 April 2026
Swingy says: Don't be swayed by FOMO. The index doesn't like what it sees out there.
Learn more about how the Swingex Index works here.
WATCHER
Stocks highlighted here each week are not recommendations to buy or sell. They are provided as ideas for swing traders to follow up on with their own research.
NGVT (Ingevity): Stocks of industrial type companies, such as specialty chemical maker Ingevity, have been steady climbers in recent months while tech stocks jump up and down.
These days, NGVT is giving us a classic cup-and-handle pattern. The shares topped out at just over $76 in mid-February. Then it slowly traced out a cup to return to the $76 area earlier this month. Now it is in a tight price range, forming a handle.
Ideally, there would have been more trading volume during the “up” part of the cup compared to the “down” part. That it didn’t happen that way means there is a higher possibility that the pattern fails to deliver the usual bullish outcome, but we are willing to give it a chance.
Traditional technical analysis says that, based on the depth of the cup, the next stop for NGVT should be around $89-90.