Re: Divergence between Nasdaq composite index and RSI

["jhmtn" <jhmtn@xxxxxxxxxxxxxxx>]

staffan, Leo, and List Memebers,

I have had a tough time understanding a divergence call when I can't see
one.  My understanding is that if the price is making lower lows and the RSI
is making higher lows, then divergence exists.  See my attached gif for the
Nasdaq with overlaid 5 day RSI (Yellow line) and 2 attempts at calculating
Divergence in the flat red line at zero and the other red line moving from
+1 to -1.  Notice that they don't agree too well as one is flat at 0.0
saying no divergence, and the other is about to turn up which generally
means a change in prices is within 2-8 days of occurring (unless it
continues downward with the next day's price and resulting RSI action.)
Neither one of these 2 RSI divergence indicators seems to work too well.

Looking at the left of the chart, we can see the thick green lines with the
upper one showing lower lows in prices and the lower green line showing
higher lows for the 5D RSI.  looking at the lows, Divergence is seen and
finally resolved with a short reaction upward movement.  But my question is
the definition of divergence.  Does it only apply to lows?  Also, since RSI
is calculated normally off the Closing prices, is it appropriate to use
price lows when looking for divergence?

Looking at the right, the thick purple lines show the action of the highs --
and they are moving parallel, so no divergence.  However, the lite blue
lines are drawn against the lows and they show a small divergence.  But
prices are still down as I write this.  It does look like a pennant
formation is forming on the RSI that "could" break higher.

Can anyone clear up how to accurately measure the RSI divergence?

Thanks, ........... John

----- Original Message -----
From: "staffan" <u46115068@xxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Wednesday, February 28, 2001 7:25 AM
Subject: Re: Divergence between Nasdaq composite index and RSI


Hi,
Clearly visible for shorter term RSI:s - RSI(3), RSI(5) etc.
Staffan

----- Original Message -----
From: <leo.timmermans.lt@xxxxxxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Wednesday, February 28, 2001 1:55 PM
Subject: Divergence between Nasdaq composite index and RSI


> Hi,
>
> In a local investment paper, an analyst said he had good confidence the
Nasdaq
> composite index would
> go up (the odds at least)  because he saw positive divergences between the
> composite and the RSI.
> Did not specify the period of the RSI. I cannot see it, but then again my
eyes
> are not yet that trained.
> Anyone sees the divergences ?? If so, can you show me a in a graphic ???
>
> thanks
> Leo
>

Attachment: Description: "2001_02_27_COMP_Divergence.gif"