FAQs
Dip Index FAQs
What does the Dip Index (DIPX) actually measure?
The Dip Index (DIPX) measures the percentage of components within a financial index or basket that are trading above a selected moving average (e.g., 50, 100, or 200-period).
For example:
If 85% of S&P 500 stocks are above their 200-day moving average, DIPX will read 85%.
If only 15% are above it, DIPX shows 15%, indicating widespread weakness.
Unlike price-based indicators, DIPX reveals internal market health — whether price moves are broad-based or driven by just a few stocks/assets.
Use DIPX to assess the sustainability of trends, spot divergences, and identify extremes in market participation — across equities, ETFs, commodities, and more.
How can I use DIPX to improve my trading entries and exits?
DIPX helps time entries and exits by identifying extreme breadth conditions and shifts in underlying momentum.
Key strategies:
Buy Signal: When DIPX rises above the oversold level (e.g., 20%), it suggests the market may be emerging from a broad sell-off — ideal for dip-buying in a bullish macro environment.
Sell/Slight-short Signal: When DIPX falls below the overbought level (e.g., 80%), it warns that strength is waning — useful for taking profits or preparing for pullbacks.
Divergence Alerts: If price makes a new high but DIPX fails to confirm, it signals weakening participation — often a precursor to reversal.
Pro Tip: Always combine DIPX signals with trend filters (e.g., 200 MA), momentum tools (e.g., RSI), and macro context (e.g., VIX, M2) to increase reliability.
Can DIPX be used on markets other than U.S. stocks?
Yes. While DIPX was designed using U.S. equity indices, it is universally applicable to any market where a basket of tradable assets forms an index.
You can apply DIPX logic to:
Commodities (e.g., energy, metals baskets)
Forex (e.g., USD-strength composite, G10 currencies)
Crypto (e.g., top 10 coins by market cap)
Sector ETFs (e.g., technology, healthcare, financials)
Note: Data availability depends on your broker/platform. Some group tickers (e.g., S5COND, NQ_D) may not be accessible on all systems.
As long as the underlying components update regularly, DIPX provides meaningful insight into internal strength — regardless of asset class.
Why do DIPX signals sometimes appear late or lag price?
DIPX is a lagging but confirming indicator, not a predictive one. This is by design.
Reasons for apparent delay:
It uses end-of-day data aggregated from multiple components.
It relies on moving averages, which smooth price action and react after changes occur.
It measures breadth, not price — so it reflects participation shifts, not instant reversals.
How to handle lag:
Use DIPX to confirm rather than predict moves.
Wait for price confirmation (e.g., breakout, candle close) after a DIPX signal.
Combine with faster oscillators like RSI or MACD for earlier warnings.
Remember: Delayed signals often have higher reliability — DIPX filters out noise by focusing on sustained breadth shifts.
How do I interpret DIPX when it’s flat or stuck in the middle (40–60%)?
A DIPX value between 40% and 60% indicates neutral market participation — neither overbought nor oversold.
This typically means:
The market is in balance — no strong leadership.
Trends may lack broad support, increasing the chance of choppy or range-bound price action.
It’s a transition phase: either consolidating before a new move, or losing momentum after a trend.
What to do:
Reduce aggressive positioning — avoid chasing entries.
Watch for breakouts from this range — a move above 60% favors bulls; below 40% favors bears.
Use this phase to reassess your strategy, update stop levels, or rotate into stronger-performing baskets.
Think of neutral DIPX like a coiled spring — direction isn't clear yet, but a move is likely building.
By understanding these core aspects of DIPX, you can apply it more effectively across timeframes and markets — turning breadth analysis into a powerful edge in your trading system.
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