AggZ Indicator

Here is a super simple indicator with dozens of applications. Similar to AggM, the AggZ is a composite trend and mean-reversion indicator rolled into one. The concept of both is to anchor a long term trending measure to a short-term mean-reverting measure so that you can have an indicator that can be traded for both long and short-term intervals. The AggZ did 20% CAGR over the last 2000 bars on the CAGR using dividend adjusted data on the SPY. The calculation is dead simple:

AggZ= (-1x( 10-day z-score)+(200-day z-score))/2

where z-score = (close-sma (closing prices over last n periods))/(standard deviation( closing prices over last n periods))

Basic Strategy on SPY: buy above 0, sell below 0.

You can optimize both variables.

Author: David Varadi/ CSS Analytics
http://cssanalytics.wordpress.com/2010/03/19/aggz-another-composite-trendmean-reversion-indicator/

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