Does the RSI indicator warn of a stock market correction?

[shukla7789]

In my opinion, every investor should have their favorite set of indicators at their disposal. Including those leading up to the economic situation, such as CLI, LEI, IWW. As well as typical ones used in the analysis of current macroeconomic data (PMI, ISM, INI SSI), technical, such as RSI, moving averages, etc. Knowledge of selected indicators allows you to assess the current market situation coolly. More effectively forecast the behavior of stock market indices in the coming months.

Relative Strength Index
RSI is the Relative Strength Index, which is a moving average used in technical analysis. The oscillator takes values ​​from 0 to 100. The Relative Strength Index is a fairly effective measure of the current denmark whatsapp database or overbought state of the market. Both the current values ​​of the indicator, as well as divergences on its chart, are used for analysis. In practice, a breakout from the bottom of level 30 can often be a buy signal. And from the top of level 70 can often be a sell signal for a given security. Sometimes values ​​of 20 and 80 are taken into account, especially in states of strong oversold and overbought markets.

SP500
The RSI for the index of 500 largest companies in the US, started to leave the overbought zone. Where it had been since mid-November.

RSI for SP 500
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Dow Jones Industrial Average Index
The DJ industry average, after a series of record-breaking, also got out of breath. The oscillator began to desire towards neutral values.

Dow Jones RSI
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WIG20
The RSI oscillator for the 20 largest companies on the WSE is undergoing a correction after a wave of strong increases.


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WIG Index
The Relative Strength Index for the broad Warsaw Stock Exchange index also sees a corresponding correction.

RSI to WIG January 2021
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Conclusions
Leading indicators of the economic situation are still in an upward trend. However, in the perspective of the coming weeks or 1-2 months, a correction may occur. This was indicated not only by high RSI levels. Also, investor sentiment in the US and Poland was excessively heated. This is indicated by the values ​​published by the American Association of Individual Investors and its Polish equivalent in the form of INI SII.