Step Sum is in the form of a new technical tool to evaluate the psychology of the market. It has been developed by Mark Lundeen and it offers a unique insight into the psychology of the market. The step sum is simply a running total of up vs. down days and it reflects trader psychology.
The step sum is a single item Advance – Decline Line. In other words; if Nifty is down from the previous day’s close, we give it a value of (-1), if they end the day up from the previous day’s close, we give it a value of (+1). So a step sum plot is merely the net sum of up and down market days over time.
I had ,in addition , observed continuous up or down as if a single up or down. It is the amazing thing about the daily ups and downs of the market is that over time 242 months , through bull markets and bear, Nifty index in the markets, see about as many up days as down. Most outstanding observation is that the sum of Step_Up over this long period is identical with that of Step_Down over the same period, , monthly positions are tabulated : Number of months (With 0) : 117, balance arising out of Number of months (With 1) : 63, Number of months (With -1) : 61 and Number of months (With -2) : 1 is Zero only.
A Chart of Step_Up or Step_Down , in the range of 2 to 8 monthly ,is shared here :
I had applied this basic concept to Nifty Data from 3rd November 1995 (for which OHLC) available from NSE site. I have used basic as per details in attached screen-shot of the excel.
Based on Data till end of 2015, first full Step Sum NIFTY chart is being shared here in below :
Basic observations arising out of 5027 days are being shared in below :
It looks to me the Step_Up's , with average value of 33.18541 , and the Step_Down's , with average value of 34.40273 are behaving as a irregular pendulum ; a graphical representation follows :
