IBOV Shadow

English
IBOV Shadow

This indicator is designed to provide a complementary analysis of the Brazilian market, offering an alternative perspective to the traditional IBOV index. It can be used IBOV, and it operates independently, seeking a correlation with the overall market by calculating based on commodities, global stocks, interest rates, the dollar, and other assets.

What the Indicator Does

The IBOV Shadow acts as a real-time fair price forecast for the Ibovespa. The line it plots represents the value the index should have at that moment, based on multiple market factors. The primary analysis comes from comparing the indicator's line with the actual Ibovespa price:

1. Underpricing (Upside Potential): When the IBOV Shadow line is above the Ibovespa's price, it suggests that the market is underpricing the index. The "fair" value is higher than the current one, which may indicate potential for an upward move.
   
2. Overpricing (Downside Potential): When the IBOV Shadow line is below the Ibovespa's price, it suggests that the market is overpricing the index. The "fair" value is lower than the current one, which may indicate that a downward correction could be on the way.
   
3. The indicator's line also changes color to signal its own trend: green when it's trending up (a strong market) and red when it's trending down (a weak market).
   

How to Use It

1. Capturing Divergences (The Main Point): The most powerful use of the IBOV Shadow is in identifying divergences. A divergence occurs when the price movement of the Ibovespa and the movement of our indicator are out of sync.
   
2. Bullish Divergence: This happens when the Ibovespa's price makes a new low, but the Shadow indicator does not follow, instead making a higher low. This suggests that downward pressure is weakening.
   
3. Bearish Divergence: This occurs when the Ibovespa's price makes a new high, but the Shadow indicator fails to do the same, creating a lower high. This is a strong sign that the uptrend is weakening.
   
4. Trend Confirmation: Use the line's color as a confirmation tool. If you already have an uptrend in mind, a green line can reinforce your analysis. Likewise, a red line can confirm a downtrend.
   
5. Contextual Analysis: This indicator is most effective when used in conjunction with other tools and analyses. Do not use it as your sole decision-making source.
   

Final Considerations

Remember that this indicator is a supporting tool. The financial market is complex, and no single tool guarantees success. Practice and the use of multiple indicators and strategies are fundamental for a complete analysis.