Tag Archives: Relative Strength Index

The Dow Jones Industrial Average Just Did Something Rare

The Dow Jones Industrial Average stayed overbought for the whole month of October in the sense of a classical technical analysis measure. This has only occurred three more times in the last 103 years.

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The Failed “Market Is Technically Overbought” Narrative

The S&P 500 is overbought in the last three days according to a popular indicator. Shorting a technically overbought S&P 500 has been a losing strategy in the last 57 years as shown in this article. Yet, the “market is … Continue reading

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Overbought Conditions In Uptrends Usually Signal Strength

I have no idea who came up with the notion of overbought/oversold conditions. Market makers have probably appreciated the gifts from unskilled technical traders who thought these levels could be easily traded. There is worse than that: some even think … Continue reading

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Reminder: The RSI is a Short-Term Momentum Indicator

I saw a chart yesterday with an overbought RSI used to make a case against continuation of an uptrend. This is absurd. The RSI is a short-term indicator of momentum and used for overbought/oversold conditions in a Gambler’s fallacy sense.

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Dow Jones Industrial Average Longest Overbought Period In 31 Years

The Dow Jones Industrial Average has stayed overbought for 21 days, which is the longest period this technical condition has persisted in 31 years. As the analysis below shows, the index has moved higher in the following 60 days with … Continue reading

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RSI Indicator Levels Are Irrelevant For Timeframes Longer Than A Couple Of Days

Changes in Relative Strength Index (RSI) have low correlation with changes in price for timeframes longer than two days. This relationship is highly robust for four major ETFs. The conclusion is that only very short-term traders should look at the … Continue reading

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