Sometimes, simple charts tell important stories ... if you know what index and indicator to look at.

The Relative Strength Indicator (RSI) is one of my favorite indicators. I don't use it alone, and instead use it with over a half-dozen indicators ... some of them proprietary indicators we have developed. None the less, by itself, the RSI can tell you about important longer term indications.

My preferred RSI setting on a daily chart is a RSI of 30. This morning, we are posting the New York Stock Exchange index with its 30 RSI. The New York Stock Exchange Index is often seen as symbols: NYA or NYSE.

What to watch for:

When a 30 RSI on the NYA falls below 50, that is a negative condition and invariably coincides with a drop or correction in the markets.

When a 30 RSI on the NYA rises above 50, that is a positive condition and typically coincides with a rise in the markets.

As you can see below, the 30 RSI has now risen above 50. This occurred as it broke through a triangular pattern to the upside. That was a positive condition.

Currently: At the same time, there are other market conditions to be aware of. For instance, the major indexes have been in a trading range since the beginning of the year and they have not broken through those resistances yet. The open today will see a "short covering" rally movement.

So, we have some shorter term positives facing off with a formidable resistance level that has not been overcome yet ... see chart 2 for this 2008 resistance and additional commentary.

Chart 2: This is the SPY's chart showing how the SPY has not been able move above its 2008 resistance level.

The current movement has been an up move within a trading range as seen below. This is quite different than an up-market-rally condition that has broken through resistances and has met the definition of an up trend by making higher/highs and higher/lows. (Feel free to use the link below to send a link of today's update to a friend or colleague.)

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