How to Combine ISE Sentiment Index and Relative Strength Index to Detect Market Reversal

Have you read the article “How to Detect the Short-Term Market Reversal by ISE Sentiment Index?” http://top5indicators.blogspot.com/2013/09/how-to-detect-market-reversals-by-ise.html.

If so, you should have learned that when ISE Sentiment Index rises dramatically and shows extreme bullishness, the market might have reached the short-term topping.

On the other hand, Relative Strength Index (RSI) tells us when market stays in overbought status for a while, the market might take a breathe and swing to the other side. You can learn more from the other article:

“How to Combine ISE Sentiment Index and Relative Strength Index to Detect Market Reversal” (http://top5indicators.blogspot.com/2013/09/how-to-profit-from-stock-market-by_17.html).

We checked our daily log, we found that ISEE closed at 149 and reached an intraday high of 181which has been seen for a while. Here is the chart, you can see the movement for the last 30 days.

Chart 1. Source: Line Graph Outline form http://www.ise.com.  Actual data compiled by Authors.

 On the other hand, Relative Strength Index (5) which chooses 5 day look-back period, has reached overbought status (greater than 70) for 7 days, and reached a high of 90.

 

 

Chart 2. Source: Line Graph Outline form StockCharts.com.  Actual data compiled by Authors.

I am not saying there will be an imminent market reversal, but we are going to take cautious stand, and take some profit off table. 

 

Dear readers, what is your view about the current stock market, bullish, bearish, or neutral?

Thanks for your visiting and reading.

Have a great day!