VL Exhaustion Score

  • The VL Exhaustion Score is for VL subscribers only. Please be respectful of the effort involved in generating this data point and restrain from sharing on social media or with non-VL subscribers.
  • The VL Exhaustion Score is a proprietary data point intended to detect when a given trend in SPY is nearing its end.
  • The VL Exhaustion Score is NOT a standalone trading signal.
  • The VL Exhaustion score does NOT constitute financial advice.

How it works:

  • Every day going back to 2004 is assigned a score. The math behind the score is proprietary, and may change over time in an effort to improve accuracy.
  • Scores are discrete and do not "build" over time. There is no relationship between the score on any day and the day(s) that preceded or followed it.
  • It's not an oscillator, it's an aggregate measure for a single day.
  • Scores are recalculated every 15 minutes throughout the day.
  • As more data arrives, the current day's score may change, as will its rank against all other scores from prior dates.
  • Ranks are shown on the VL header for paid subscribers. The lower the rank, the better the score. #1 is the highest score, thus making it the strongest indication of exhaustion.
  • Scores are provided at four intervals.
    • Total - The score for the current day compared to all other days since 2004.
    • Last 30 Days - The score for the current day compared to all other days in the last 30 days.
    • Last 90 Days - The score for the current day compared to all other days in the last 90 days.
    • Last 365 Days - The score for the current day compared to all other days in the last 365 days.
The only score that matters or that might be actionable is the "All Time" score. The other scores exist for additional context only.

How to interpret:

The VL Exhaustion Score is color coded to help interpret the strength of the signal.

  • Red: Weak signal. Not a strong indication of exhaustion. Not actionable.
  • Yellow: Moderate signal. Some indication of exhaustion. Stay on watch. Not actionable.
  • Green: Strong signal. Good indication of exhaustion. Usually actionable.

    If the signal is green: and the current trend is up, consider exiting, hedging, or otherwise protecting long positions. Prepare for a local high.
    If the signal is green: and the current trend is down, consider exiting, hedging, or otherwise protecting short positions. Prepare for a local low.
Nuance::

The VL Exhaustion Score is a data point to help identify potential trend exhaustion. Trend exhaustion occurs before meaningful reversals in price. The signal is best suited for higher timeframes and does not trigger very often, though times of increased volatility may see it trigger more frequently.

  • Sometimes the VL Exhaustion score will be sufficiently high on the last day of a trend. Sometimes this occurs a day or two (or more) before the trend officially ends, with price remaining relatively flat before a reversal takes hold.
  • Scores are usually highest *near* the end of a trend, not necessarily *at* the end of a trend. Allow for overshoot.
  • Not all trends end with a sufficiently high score. Trends can end without one.
  • Do not blindly follow the score as a justification for taking a trade. It is best used in conjunction with other indicators. It exists to add confidence to a trade, not as a sole basis for taking one.
  • There is no guarantee that a trend will reverse after an exhaustion score registers as sufficiently high. It's reasonably accurate, but not perfect.
  • There is no time limit on how long a trend can last after an exhaustion score registers as sufficiently high, nor how long the next trend will last.
  • There is no price target associated with the current trend, nor the next trend.
  • It is not a guarantee of a trend exhaustion nor reversal, only a probabilistic indicator.
  • Once a meaningful trend change begins, the signal is no longer "live." It only exists to identify exhaustion, not what comes after. The end of a trend does not constitute the beginning of a new one. Sometimes it just signals that price will enter a period of balance, not a swift reversal.
Commentary::

Additional commentary about the VL Exhaustion Score may be provided in the VL Discord.

Coming Soon::

  • History: A grid of all dates and their respective scores.
  • Chart: A chart of the scores over time plotted against SPY, with the highest scores highlighted.