Saturday, January 10, 2009

RSI-mon Sez ~ Falling RSIs, Think Ahead!

As a follow-on to Market Rewind's recent post on the overdue nature of this pullback, by request and thinking ahead with the Spider's (SPY) RSI[2] having fallen quickly to 12 or so, here are the historical odds of a next-day higher after successive RSI[2] readings below 10:

Note the immediately higher odds of a next day gain with a dip after sustained selling pressure before jumping back higher still. Also note that, in comparison to the prior post, oversold readings under 10 have historically been outnumbered and outlasted by overbought readings above 90. This is expected given the positive long-term drift of the markets. Lastly, a neat little RSI widget is embedded below for your own experimentation and future use.

Postscript: The pending ETF Rewind presents a five-day history of short-term RSIs for nearly 170 ETFs across nine major asset classes. How great is that!

1 comment:

Woodshedder said...

Very cool Jeff.

I'm going to run my test in reverse too, to get an idea of the drawdowns and avg. trade.