Read About The Liquidity & Sentiment RSI (LS-RSI)
▲The Relative Strength Index (RSI) is a widely-used momentum oscillator in technical analysis, valued for its ability to identify overbought and oversold conditions in financial markets. However, traditional RSI suffers from significant limitations including frequent false signals in trending markets, lack of consideration for macroeconomic factors, and static thresholds that fail to adapt to varying market conditions. This paper presents an innovative enhancement to the RSI that transforms it into a context-aware indicator by incorporating three key innovations: Monetary Policy Integration: We integrate US M2 money supply growth rates to capture the impact of monetary liquidity on asset prices. The M2 factor adjusts RSI readings by up to ±10% based on deviations from historical average money supply growth (7% annually). Sentiment Analysis: Real-time news sentiment analysis using VADER (Valence Aware Dictionary and sEntiment Reasoner) quantifies market psychology. The sentiment factor provides ±5% adjustment based on the aggregate sentiment of recent news articles. Monetary Policy Time Lag: A novel adjustable lag parameter (0-10 days) models the delayed transmission of monetary policy changes to financial markets. This addresses the reality that monetary policy effects are not instantaneous but propagate through the financial system over time. The enhanced indicator also features volatility-adjusted dynamic thresholds that adapt to market conditions, replacing the static 70/30 levels with thresholds that expand or contract based on 20-day rolling volatility percentiles.
This system introduces an enhancement to the RSI, evolving it into a context-aware indicator by incorporating trends in global M2 money supply—a key measure of liquidity across major economies—and real-time news sentiment scores, which capture prevailing market psychology.
Through conceptual frameworks, formula adjustments, and practical implementation strategies, these integrations enable the RSI to better account for external influences on asset prices, such as liquidity-driven inflation or sentiment-induced volatility. The result is a more robust tool designed to reduce misleading signals, extend its applicability across asset classes like equities, cryptocurrencies, and commodities, and provide traders with adaptive insights that align momentum analysis with real-world market dynamics.
For more information go to our blog read the paper: https://blog.macropulze.com
While our beta calculations are still under development and not yet public, you can explore cached results and an interactive demo using synthetic data for educational purposes.
VIEW ACME DEMO →Disclaimer: This is a prototype implementation of the paper titled "Enhancing the Relative Strength Index with Global M2 Money Supply and News Sentiment: A Context-Aware Technical Indicator." Please note that this is not financial advice—it serves solely as a demonstration of AI capabilities.
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