An oscillator that attempts to identify overbought and oversold conditions.
Overview
Created by Tom DeMark, the TD Range Expansion Index as the indicator is also know as, is described in “DeMark on Day Trading Options” written by T.R. DeMark and T.R. Demark, Jr. (McGraw Hill, 1999). The TD REI is a market-timing oscillator that attempts to overcome problems with exponentially calculated oscillators, such as the MACD, by being arithmetically calculated.
TD REI plotted on the USD/CAD daily chart 4/11/2011
Source: VT Trader
Interpretation
Plotted on a chart, the TD REI typically produces values of -100 to +100; Readings of +45 or higher indicates overbought conditions while readings -45 or lower indicate oversold conditions.
DeMark advises against trading in extreme overbought or oversold conditions indicated by six or more bars above or below the 45 thresholds.
