Tredey Market Gauge: A Weighted Composite of Overbought/Oversold Signals

How to read the gauge

The main dial reads from 0 to 100. Lower values mean conditions historically associated with oversold markets (RSI low, price near lower Bollinger Band, elevated put/call); higher values mean overbought conditions. The exact thresholds vary by asset and regime, but the following zones are useful defaults:

The gauge is not a signal. It's a context read. Decisions should incorporate the gauge reading alongside the asset's own structure (key support/resistance, event calendar, sector rotation), position-level risk, and the journal's playbook rules.

What the sub-gauges measure

Each sub-gauge shows the raw value of one indicator and its normalized signal (a value between -1 and +1 where +1 is "maximally overbought" and -1 is "maximally oversold" for that indicator). Move the slider to weight it more or less in the composite.

RSI (Relative Strength Index, 14-period) measures the magnitude of recent price changes. RSI ≥ 70 is the textbook "overbought" zone; RSI ≤ 30 is "oversold." RSI is most useful in range-bound markets; in strong trends it can stay extreme for weeks.

MACD (Moving Average Convergence Divergence) is a momentum indicator based on the difference between two exponential moving averages (12 and 26 periods) and a 9-period signal line. The histogram (MACD minus signal) is what the gauge reads. Positive histogram with recent bullish crossover = +1; negative with bearish crossover = -1; flat = 0.

ATR (Average True Range, 14-period) measures recent volatility as a percentage of price. A rising ATR can indicate "overheated" conditions if paired with a sharp rally, or "panicky" conditions if paired with a sharp selloff. The gauge reads ATR as a mildly positive signal — high ATR itself isn't directional.

Bollinger Band Position is where the current price sits between the lower and upper Bollinger Bands (20-period, 2 standard deviations). A position of 0.5 is the middle band; 0+ is between lower and middle; 1+ is at or above the upper band. The gauge reads 0.2 as "cheap relative to recent range" (-0.7 signal) and 0.8+ as "expensive" (+0.7 signal).

Volume vs 20-day average reads as a signal only when paired with price action. High volume at upper-band prices contributes a positive signal (overbought with conviction); high volume at lower-band prices contributes a negative signal (oversold with conviction). Volume near average reads as neutral.

Put/Call Ratio is the ratio of put options traded to call options traded. A high ratio means more puts being bought (bearish hedging or bearish speculation) and historically is a contrarian bullish signal. A low ratio means more calls (bullish sentiment) and can be a contrarian bearish signal at extremes. The gauge maps high ratio to negative (contrarian bullish), low ratio to positive.

Preset profiles

The four preset buttons set the weights to common trading philosophies. They're starting points, not rules.

• Momentum — RSI and MACD dominate. Best for trend-following. The gauge will swing further from neutral in momentum regimes.
• Volatility-aware — ATR, Bollinger, and volume dominate. Best for trading volatility regimes (compression, expansion). Mean-reversion setups get more weight.
• Options-sentiment — Put/call ratio dominates, with RSI and volume as secondaries. Best for trading sentiment extremes (e.g., the kind of washout that produces high-quality long entries).
• Mean-reversion — Bollinger dominates, with RSI secondary. Best for trading range-bound markets with defined support/resistance.

Why a weighted average

A simple "score = (RSI + MACD + ...)" treats every indicator equally, but in practice RSI matters more in some regimes and Put/Call matters more in others. Weighting lets you express regime priors without rebuilding the indicator set. The default (all weights = 1.0) is the equal-weight composite; the presets are regime-shaped priors.

The composite value G is bounded between 0 and 100 only when all weights sum to non-zero. If you zero out every weight, the gauge falls back to neutral (50). The weights are not normalized internally — the absolute sum of weights affects the volatility of the gauge reading over time, but not its bounded range.

How traders use these signals

In a typical options-trading workflow, the gauge is one of several reads used to set context, not to fire trades directly. Common uses:

1. Sizing decisions. When the gauge is in an extreme zone (G < 20 or G > 80), trade size is often reduced because the existing trend is at risk of reversal. When the gauge is neutral, full position sizing per the playbook is appropriate.
2. Strategy selection. High-gauge readings favor short-volatility structures (iron condors, short verticals, covered calls). Low-gauge readings favor long-volatility structures (long calls, long straddles, debit spreads).
3. Strike selection. In a high-gauge regime, OTM short strikes are further from spot and collect less premium but have higher win rate. In a low-gauge regime, closer short strikes collect more premium but face higher assignment risk.
4. Timing. A gauge moving from neutral to overbought gradually is a different signal than a gauge that spikes to overbought in one session. The former is trend confirmation; the latter is often a blow-off top.

Methodology and limitations

The gauge uses normalized signals — each indicator is mapped from its raw value to a -1..+1 range using piecewise linear mappings. The exact normalization breakpoints are heuristic (RSI 30/50/70, Bollinger 0.2/0.5/0.8, etc.) and are not derived from historical regime statistics. The gauge will mis-read regime transitions because the underlying indicators are lagging by construction.

The gauge does not incorporate:

• Fundamentals (earnings, valuation, free cash flow)
• Macro context (rates, inflation, geopolitical)
• Cross-asset relationships (bond/equity correlation, USD strength)
• Sector rotation
• Sentiment beyond put/call

These are read separately and are not part of the composite. The gauge is a technical context read, not a complete market view.

Live data roadmap

The current page uses sample SPY data as of 2026-07-22 close. The slider/preset logic is real and reflects the input indicators correctly; only the underlying data is static. To upgrade to live data:

1. CF Worker proxy — a Cloudflare Worker that fetches from Yahoo Finance server-side (no CORS issue from worker), computes indicators, and returns JSON with CORS headers. ~2 hours of build.
2. Pre-computed cache — a scheduled CF Worker that updates indicator values for a basket of tickers every 5 minutes during market hours, stores in KV, and the page reads from KV. Reduces user-perceived latency but adds infrastructure.
3. Client-side direct fetch — call a CORS-enabled API (Twelve Data, Finnhub) from the browser with an API key. Free tiers exist but rate-limited; paid tiers needed for production use.

The current page is structured so any of these three paths can replace the hardcoded SAMPLE_DATA constant in the script block. The composite logic, weight handling, preset profiles, and visualization are all data-source-agnostic.

See also

• Playbook SOP — how the gauge reading fits into trade selection
• Standard deviations — the math under indicators like RSI and Bollinger
• Probabilities — what indicator readings actually imply for option pricing
• Risk vs reward — how sizing interacts with regime reads

The gauge is informational. It is not investment advice. Every input indicator is a lagging read of price action; combining lagging reads does not produce a leading signal. Use the gauge as one input among many, alongside structure, events, and risk management.