Editor’s note: Additional charts illustrating the concept explained in this article are included as an Appendix to this month’s newsletter.

The Relative Strength Index, or RSI, is among the most popular indicators selected on Bloomberg and is commonly used as an oscillator to time overbought and oversold markets. It can also be used as an indicator of future market weakness.  You may be thinking of divergence analysis, rather this article will discuss a different and unique application of the indicator as it relates to the continuous positive momentum in the S&P500.

Before turning to the rules for interpreting RSI as a trend forecasting tool it is important to remember that indicators don’t have to provide information all of the time to be useful. Infrequent but highly reliable signals could be more valuable than frequent signals with a low rate of success. This analysis of RSI provides infrequent signals that have had a

Editor’s note: This was originally published by Thompson Reuters and is reprinted here with permission. Knowing which indicators are widely used can help traders understand why prices react in certain ways.

Technically inclined traders gauge markets with either trend tools or various analyses. They are looking for insight on the strength or weakness of the ongoing trend and on possible beginning of a new trend. This letter focuses on the most popular technical analyses. These analyses should be used in conjunction with trend tools, such as trend line and various Fibonacci ration analyses.

The seven most popular analyses are:

1. Moving averages
2. Bollinger Bands
3. Stochastics
4. Moving Averages Convergence Divergence (MACD)
5. Relative Strength Index (RSI)
6. Ichimoku Kinko Hyo
7. Rate of Change

MOVING AVERAGES

The chart above shows euro/sterling (EURGBP=) with four exponential moving averages drawn on it: 21-day (light blue), 55-day (green), 100-day

How would you describe your job?

Currently, I am a fee-only, ETF-only, financial advisor with Morgan Stanley Wealth Management. I try to simplify the investment management process using my ETF-only models and give my clients active portfolio management at a lower cost than one would find from many other advisors.

What led you to look at the particular markets you specialize in?

My concentration of study within the technical analysis field, especially while working at Lowry Research, was Supply & Demand. My top-down, mostly quantitative approach relies heavily on market breadth analysis, and to really analyze breadth, you need a large universe of “things” to properly create and/or use an indicator. Naturally, that drew me to equities, since there are so many different broad universes to choose from (domestic market indexes, sector indexes, and international market indexes). My current project, which has been largely successful thus far, is to apply my quantitative methodology

Over the past 4 years I have been analyst providing trading ideas to institutional and retail clients. Over that time, I’ve come to realize my call sheet and their ledger would not always agree. Rather than debating my performance, let’s hit the nail on the head and tackle the main problem:

Why does a trader who trades based on the calls of an analyst have a huge variation in his profit figure (if there is a profit) when compared to the ‘paper’ profit figure shown in the analyst’s call sheet?

To understand the answer to this problem, we need to first understand the roles of each of these market participants.

A trader is anyone who tries to buy low and sell higher or takes short positions by selling high and buying to cover after a price decline. A trader’s holding perspective can be anything from a few minutes to a couple

ETNA, a trading platform provider traditionally catering to broker-dealers, announced today that it is partnering with FinTech startups as well as established financial services firms looking to launch new software. Having noticed an up-tick in development costs over recent years as consumer expectations grow, ETNA’s goal is to lower the buy-in for new and established FinTech firms looking to create new technologies. Their platform has already facilitated the successful launch of FinTech startups Tradier and ETRE Financial, and is now being offered to a broader market.

“We encourage entrepreneurs to create new technology products and services without the need to take out a second mortgage or sell a kidney” commented Roman Zhukov, CEO at ETNA. “Many of the components that go into FinTech are very similar. There is no need to reinvent the wheel and spend millions of dollars when someone has already done it and is willing to share the

The weekly charts below of the Dow Jones Industrial have all been provided by Bloomberg LP.

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