Composite & famousElder Ray Index
Bull Power and Bear Power — how far each bar's high and low reach beyond a moving average.
Works best in trending marketsEngine-computed on a fixed sample series
What it is
The Elder-Ray Index, another Dr. Alexander Elder invention, is a pair of readings that measure the raw strength of buyers and sellers separately rather than netting them into a single line. Elder named it after X-rays because it lets you see the bones of a market — the underlying buying and selling pressure beneath the surface of price. It answers two questions at once: how hard can bulls push price above its fair value, and how deep can bears drag it below. The two answers are plotted as histograms called Bull Power and Bear Power. For a beginner, the key idea is that a market is a tug-of-war, and Elder-Ray shows you the strength of each team instead of just the position of the rope.
How it is calculated
Everything is measured against a 13-period Exponential Moving Average of closing prices, which Elder treats as the market's consensus of fair value. Bull Power is simply the current bar's high minus that 13-EMA — how far above fair value the buyers managed to lift price. Bear Power is the current bar's low minus the same 13-EMA — how far below fair value the sellers managed to press it. Because a bar almost always has its low beneath the average and often its high above it, Bull Power is usually positive and Bear Power usually negative, and each is plotted as its own histogram around a zero line. The numbers are in the instrument's own price units, so they grow and shrink with volatility.
Reading it, step by step
In a healthy uptrend you want Bull Power positive and making higher peaks, while Bear Power stays negative but ticks upward toward zero, showing sellers losing their grip. In a downtrend you want the mirror — Bear Power deeply negative and Bull Power weak or falling. The single most valuable reading is divergence: if price carves a lower low but Bear Power makes a higher low, sellers are running out of force even as price falls, a classic warning of a bottom. The opposite bearish divergence — price at a higher high while Bull Power makes a lower high — warns that a rally is hollow. Because absolute values scale with price, you read the shape, the direction, and the divergences rather than any fixed threshold.
Best timeframes and settings
The standard setting is the 13-period EMA on daily charts, the combination Elder documented and the one most traders leave untouched. It works cleanly on daily and weekly data for swing and position trading, where the 13-EMA is a meaningful trend anchor. You can apply it to intraday charts, but the histograms become jumpier and divergences less reliable as the timeframe shrinks. Some traders lengthen the EMA to 21 or 26 to smooth the reference in very volatile names, which slows both histograms and reduces false divergence signals at the cost of later reads. As always, changing the length trades responsiveness for noise, and the 13-period default is a well-balanced starting point.
When and where to use it
Elder-Ray is at its best in trending markets used together with the slope of its own 13-EMA, which supplies the directional context the two histograms need. It suits stocks and index futures particularly well, and any liquid instrument where price makes clean swings. In a flat, choppy range the histograms oscillate shallowly around zero and their divergences fire too often to trust. Avoid reading Bull and Bear Power in isolation from the EMA trend — without knowing which way the average slopes, a positive Bull Power and a negative Bear Power simply describe a normal bar and tell you nothing actionable. Use it to time entries within a trend you have already identified, not to call the trend from scratch.
Strategies that use it
Elder's signature long setup requires two conditions together: the 13-EMA is rising, confirming an uptrend, and Bear Power is negative but ticking higher, showing sellers weakening on the latest dip — you buy that dip and stop below the recent swing low. The mirror short setup wants a falling EMA and Bull Power positive but making lower highs, and you sell into that failing bounce. A second, higher-conviction strategy trades divergence: in an uptrend, when price makes a lower low but Bear Power makes a higher low, you buy the reversal as selling pressure dries up. In each case you exit when the opposing power flips decisively against you — a long is in trouble when Bull Power collapses and Bear Power deepens.
Combining it with other indicators
Elder-Ray was designed to be read alongside a trend filter, and its own 13-EMA is the minimum companion. It pairs naturally with the MACD or the Elder Impulse System, which supply momentum context and turn the two histograms' divergences into higher-confidence signals. Because Elder-Ray uses only price, adding a volume tool such as On-Balance Volume or the Force Index tells you whether the pressure it measures is backed by participation. Horizontal support and resistance or Fibonacci levels give you the where to match Elder-Ray's how-strong. Steer clear of combining it with other high-low-range oscillators like Williams %R, which would largely echo the same information.
Where it fails
The readings are expressed in raw price units, so they cannot be compared across instruments and even shift meaning within one instrument as volatility changes — a Bull Power of 2.0 is large for a quiet stock and trivial for a volatile one. Divergences, its best feature, are notorious for appearing early and repeatedly, so acting on the first one in a strong trend can put you in front of a freight train. Used without the EMA trend filter, the histograms give contradictory cues and lure beginners into counter-trend trades. The 13-EMA itself lags, so both histograms confirm turns slightly late. The fix is discipline: only trade divergences in the direction the EMA already permits, and size positions from structure rather than from the histogram's raw value.
A worked example
Suppose a stock in a clear uptrend has a 13-EMA at 40.00. Over three pullback days its lows print 39.40, 39.55, and 39.70, so Bear Power reads -0.60, then -0.45, then -0.30 — still negative, but rising toward zero, meaning each dip meets less selling than the last while the EMA keeps sloping up. That is Elder's textbook long trigger: buyers are defending higher, sellers are fading, and the trend is intact. You buy near 39.75 and place your stop at 39.30, just under the deepest recent low. Price resumes its climb, Bull Power expands to fresh highs confirming the move, and you trail your stop upward; had Bear Power instead kept deepening to -0.80 while the EMA rolled flat, you would have stood aside because the pressure was still flowing the wrong way.