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10.22 MASS Index

The MASS index by Donald Dorsey is based on daily trading range. Each day’s range high to low is calculated and those values are smoothed with a 9-day EMA (see Exponential Moving Average). A ratio of that value with a second EMA smoothing is then taken, and the past 25 days of those ratios added up.

                    EMA[9] of high-low
MASS = Sum[25] of -----------------------
                  EMAofEMA[9] of high-low

The EMA and the EMA of EMA are normally quite close, making their ratio usually about 1 and hence the sum formed is usually close to 25. The most significant pattern Dorsey looked for was a “reversal bulge” where the index goes above 27 then falls back below 26.5, indicating a widening of daily trading range and suggesting a reversal in price is likely.

10.23 EMA of EMA

Applying an EMA a second time gives a quite different result from a plain EMA. It’s still a weighted average of recent prices, but whereas a plain EMA is dominated by the most recent prices, a double EMA spreads more broadly, and the latest few days’ influence is in fact smaller than the peak weights (at about N/2 days back). The following graph shows the weights for N=10.

EMA of EMA weights graph

The twice-smoothed EMA is also available directly as a moving average option, under “Low Priority” in the indicator lists, to see its effect on prices or on an oscillator.

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