Reverse Repo CorrelationReverse Repo Correlation Indicator
This TradingView indicator calculates the correlation between the current stock's close price and the value of the Reverse Repo Rate (`RRPONTSYD`). It uses the Pearson correlation coefficient to measure the strength and direction of the relationship.
Inputs
- **Correlation Length**: The number of bars used to calculate the correlation.
- **Background Transparency**: The transparency level (0-100) for the background color indicating positive or negative correlation.
### How it works
1. The indicator retrieves the close price of the current stock and assigns it to the `stockClose` variable.
2. The **Correlation Length** input determines the number of bars used to calculate the correlation.
3. The `pearson_corr` function calculates the Pearson correlation between the `stockClose` and `rrpontsydValue` variables over the specified length.
4. The `rrpontsydValue` is retrieved using the `request.economic` function, which fetches the Reverse Repo Rate value (`RRPONTSYD`) for the "US" economic calendar.
5. The correlation value is plotted on the chart as a line, with positive correlations displayed in green and negative correlations in red.
6. The **Background Transparency** input determines the transparency level of the background color, which changes based on the correlation value. Positive correlations have a green background, while negative correlations have a red background.
Adjust the `correlationLength` and `transparency` inputs as needed.
Reverserepo
SPX Fair Value Bands V2An updated version of the SPX Fair Value Bands script from dharmatech and based on the net liquidity concept by MaxJAnderson .
Now with full customization of parameters through the settings (Dialog Box) and allowing the options to the use of
1) Standard Bands based on Offsets of the Fair Value
2) Bollinger Bands
3) Keltner Channels
to better capture buy/sell areas rather than relying on noisy unreliably (and unevenly) updated data from the Treasury/Fed.
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Net Liquidity's importance in the new post-COVID QE to QT regime as described MaxJAnderson
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" In past cycles, size of Fed's balance sheet changed a lot, while TGA and RRP changed relatively little. So size of balance sheet roughly equated Net Liquidity.
(The Treasury General Account) TGA and (Reverse Repo) RRP didn't matter. They were rounding errors by comparison.
But starting in 2020, relative changes in TGA and RRP have been THREE TIMES LARGER than the change in size of the Fed's balance sheet. As result, changes in TGA and RRP have taken over as the primary drivers Net Liquidity.
This is new, and changes the game significantly. Again - the size of the Fed's balance sheet doesn't matter.
What matters is the portion of it that's available to circulate in the economy (Net Liquidity).
And ever since 2020, the Treasury and Reverse Repo have become what controls that. Not the size of Fed's balance sheet.
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The idea that follows is simple,short when $SPX reaches extreme levels of overvaluation, and close out when SPX returns to being undervalued. Here's the formulas I currently use to determine fair value:
Fair Value = (Fed Bal Sheet - TGA - RRP)/1.1 - 1625
And here's the trading rules I currently follow:
Short when diff of $SPX - Fair Value > 350
Close when diff of $SPX - Fair Value < 150
When one of these rules is triggered upon market close on a given day, trades are entered at open of the following day "
SPX Fair Value BandsThese are based on Darius Dale and Max Anderson's Net Liquidity model.
This is intended for use with the $SPX chart.
