CapitalFlowsResearch: PEMA

CapitalFlowsResearch: PEMA — Price Extension

CapitalFlowsResearch: PEMA is a visual regime indicator that measures how far price is trading from its dynamic equilibrium and translates that behaviour into a clean, colour-coded background. Instead of simply showing whether price is above or below a moving average MA, the tool evaluates how unusual that distance is relative to recent behaviour, creating a normalized “extension score” that adapts across assets and timeframes.

The indicator then highlights periods where price enters meaningful positive or negative extension zones, using customizable thresholds and optional smoothing to control signal sensitivity. The result is a subtle but powerful overlay that helps reveal when markets are operating in balanced conditions, when they’re stretched, and when early signs of exhaustion or continuation may be emerging—without cluttering the chart or exposing the underlying mechanics.