SPX RSI Reversal as a Momentum Signal

Key points:

• Momentum is an important factor in the stock market, particularly when it follows an oversold condition
• The S&P 500 weekly RSI dropped below 40 during the March 2026 sell-off
• On April 17th, the weekly RSI closed back above 60, thus triggering a historically compelling momentum signal

A reversal for Weekly RSI

The standard Relative Strength Index (RSI) indicator measures to what degree an asset is overbought, oversold, or somewhere in between. One useful study looks for an oversold signal to occur, and then monitors for a powerful reversal as a sign of potentially better days ahead.

What we will test for specifically is the following pattern using the 14-week Relative Strength Index (RSI) for the S&P 500 index:

• The 14-week S&P 500 RSI closes a week below 40
• Subsequently, the same 14-week RSI closed a week back above 60
• Once this pattern completes, we will deem the market environment as favorable for stocks for at least 189 trading days

The chart below shows the entry and exit dates using the rules above since 1970. Most recently, the 14-week S&P 500 RSI closed below 40 during the week of March 27th. Just three weeks later, the RSI closed above 60 on April 17th. 

The chart below highlights the last 10 years of signal activity. The red boxes in the chart below highlight the pe