SMT Divergences -- Indicator Contract¶

Identity¶

Field	Value
Pine Title	`"SMT Divergences"`
Short Title	`"SMT"`
Study Filter	`"SMT Divergences"`
Overlay	`true`
Timeframe	Any

Visual Channels¶

Channel	Signal Role	Required for Strategy
Lines	Primary -- divergence lines connecting pivot points	Yes
Labels	Primary -- divergence type and paired instrument identification	Yes

SMT Divergences uses only two visual channels. Both carry essential signal data.

Lines -- Divergence Lines¶

Each SMT divergence is drawn as a line connecting two pivot points on the chart.

Bullish SMT¶

A bullish SMT occurs when the current instrument makes a lower low but the paired instrument makes a higher low (divergence at lows).

Property	Value
Color	`bullColor` (default: black)
Width	`bullWidth` (configurable)
Style	`bullStyle` (configurable: Solid/Dashed/Dotted)
Start point	First pivot low (x1, y1)
End point	Second pivot low (x2, y2), where y2 < y1 (lower low on current instrument)

Bearish SMT¶

A bearish SMT occurs when the current instrument makes a higher high but the paired instrument makes a lower high (divergence at highs).

Property	Value
Color	`bearColor` (default: black)
Width	`bearWidth` (configurable)
Style	`bearStyle` (configurable: Solid/Dashed/Dotted)
Start point	First pivot high (x1, y1)
End point	Second pivot high (x2, y2), where y2 > y1 (higher high on current instrument)

Line Interpretation¶

The slope of the line combined with the label style determines the divergence type:

Line connecting two lows with a downward slope on the current instrument + label_up = Bullish SMT
Line connecting two highs with an upward slope on the current instrument + label_down = Bearish SMT

Labels¶

Label Properties¶

Property	Value
Text	`"SMT - {tickerName}"` where `{tickerName}` is the paired instrument
Position	Midpoint of the divergence line
Color	`labelColor` (default: black)
Size	`labelSize` (configurable)

Label Style Encoding¶

Style	Meaning
`label.style_label_up`	Bullish SMT -- divergence at lows, expect price to rise
`label.style_label_down`	Bearish SMT -- divergence at highs, expect price to fall

Label Text Pattern¶

"SMT - {tickerName}"

Examples:

"SMT - ES" -- divergence detected against ES (when charting NQ)
"SMT - NQ" -- divergence detected against NQ (when charting ES)
"SMT - ETH" -- divergence detected against ETH (when charting BTC)

The tickerName in the label identifies which instrument was used for comparison.

Auto-Pairing¶

The indicator automatically pairs correlated instruments. When one is charted, the other is used for divergence comparison.

Pair	Instrument A	Instrument B
Index Futures	NQ (Nasdaq)	ES (S&P 500)
Crypto	BTC (Bitcoin)	ETH (Ethereum)
Metals	GC (Gold)	SI (Silver)
Energy	CL (Crude Oil)	RB (RBOB Gasoline)

If the charted instrument does not match any auto-pair, the user can specify a manual ticker input for comparison.

Pairing Direction¶

The label text always shows the paired instrument (not the charted one). So if you are on an NQ chart and see "SMT - ES", the divergence was detected between NQ (charted) and ES (paired).

Breakage Detection¶

An SMT divergence can be broken (invalidated) after it forms.

Bullish SMT Breakage¶

A bullish SMT is broken when price drops below the SMT's price level (the lower low that formed the divergence).

Bearish SMT Breakage¶

A bearish SMT is broken when price rises above the SMT's price level (the higher high that formed the divergence).

Visual Behavior on Breakage¶

`delBroken` Setting	Behavior
Enabled (default)	Broken SMT's line and label are deleted from the chart
Disabled	Broken SMT's line and label remain on the chart

Snapshot Implications

When delBroken is enabled, the interpreter will never see broken SMTs -- they are removed before the snapshot is taken. This means all visible SMTs are unbroken (valid). When delBroken is disabled, the interpreter must determine breakage by checking if price has violated the SMT's level.

State Derivation¶

SMT Divergences does not have a traditional state machine. Instead, the strategy state is derived from the set of currently visible elements on the chart.

Algorithm¶

Collect all SMT labels visible on the chart (filtered by study_filter "SMT Divergences").
For each label, determine:
- Direction: label_up = bullish, label_down = bearish
- Paired instrument: parse from label text ("SMT - {ticker}")
- Price level: label y-position (midpoint of the divergence)
- Time: label x-position (midpoint of the divergence line)
Sort by time (most recent last).
Filter (if delBroken is disabled):
- For bullish SMTs: broken if current price < associated line's lower y-value
- For bearish SMTs: broken if current price > associated line's upper y-value
- Remove broken SMTs from consideration
Most recent unbroken SMT = the active signal.

Resulting States¶

Condition	State	Strategy Implication
No SMT labels visible	`NO_SMT`	No divergence signal. Neutral.
Most recent is bullish (`label_up`)	`BULLISH_SMT`	Expect price reversal upward. Supports long bias.
Most recent is bearish (`label_down`)	`BEARISH_SMT`	Expect price reversal downward. Supports short bias.
Multiple SMTs, mixed directions	Use most recent	Older signals are superseded by newer ones.

Parser Rules¶

#	Channel	Identifier	Meaning	Parser Logic
1	Label	text matches `"SMT - .+"`, style == `label_up`	Bullish SMT signal	Parse paired ticker from text. y-position = signal price level.
2	Label	text matches `"SMT - .+"`, style == `label_down`	Bearish SMT signal	Parse paired ticker from text. y-position = signal price level.
3	Line	color == `bullColor`, connects two lows	Bullish divergence line	Start and end y-values define the divergence range. Lower y = breakage level.
4	Line	color == `bearColor`, connects two highs	Bearish divergence line	Start and end y-values define the divergence range. Higher y = breakage level.
5	Label	Absent (deleted)	Broken SMT (when `delBroken` enabled)	If previously seen, now gone = broken and invalidated.
6	Line	Absent (deleted)	Broken SMT line (when `delBroken` enabled)	Accompanies label deletion.

Associating Lines with Labels¶

Each SMT event produces exactly one line and one label. To associate them:

The label is positioned at the midpoint of the line (both x and y).
The label's x-position falls between the line's x1 and x2.
The label's y-position is approximately (line.y1 + line.y2) / 2.
The label text ("SMT - {ticker}") and style (label_up/label_down) match the line's color (bullColor/bearColor).

In practice, iterating labels is sufficient for state derivation. Lines provide additional precision (exact pivot prices) when needed for breakage detection.

Edge Cases¶

Case	Handling
Multiple SMTs visible simultaneously	Normal. Multiple divergences can exist at different times and price levels. Strategy uses the most recent unbroken one.
Bullish and bearish SMTs both active	Conflicting signals. Most recent takes precedence. If they formed at the same time (rare), no clear signal -- treat as neutral.
`delBroken` disabled and many old SMTs remain	Filter by time relevance. Only consider SMTs from the current or recent sessions. Check breakage status for each.
Same-color lines for bull and bear (both default black)	Cannot distinguish by color alone. Must use label style (`label_up` vs `label_down`) as the primary discriminator.
Paired instrument data unavailable	Indicator will not produce SMT signals. No labels or lines will appear. State = `NO_SMT`.
Manual ticker input (non-auto-pair)	Label text will show whatever ticker the user configured. Parse the same way.
SMT on very old bar (off visible chart area)	MCP only returns visible elements. Old SMTs scrolled off-screen are not in the snapshot. This is acceptable -- stale signals are not relevant.
Line and label count mismatch	Should not occur in normal operation. If it does, trust labels for state derivation (they are the primary signal carrier).
Multiple SMTs from different pairs on same chart	Unlikely (indicator is configured for one pair at a time). If it occurs, all labels will reference the same paired ticker.