Wednesday, January 7, 2009

RSI-mon Sez ~ This Pullback Was Overdue!

Looking down my blogroll, I see that the wise and thorough 'Woodshedder' has beat me to the punch with an excellent post on this topic, so I will keep this brief.

As you will note below, the odds of a next-higher day fall precipitously compared to average for each successive day that the S&P500 RSI[2] exceeds 90. We had had readings over 90 for the last four days; nearly five by a hair counting December 30th's 89+ reading. As has been discussed extensively throughout the financial blog-o-sphere (most notably over at MarketSci), the mean-reversion versus trend tendency has strengthened since the late-nineties.

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!


Anonymous said...

Hi Jeff.

Thanks for all of your great work. I find your commentary of tremendous value.

Do you have any data similar to that of this post but on the odds of an up day once the RSI(2) is below 10?

Thanks again.

Jeff Pietsch CFA Esq said...

Hi Anon, I'll get that together in the days ahead for you. You will find an inverse result.

Jeff Pietsch CFA Esq said...

Anon, here is that promised post: