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E-RSI: ENHANCED RELATIVE STRENGTH INDEX

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E-RSI: Enhanced Relative Strength Index System

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E-RSI (Enhanced RSI) represents a significant evolution in technical analysis, transforming the traditional Relative Strength Index into a sophisticated, context-aware trading indicator. This advanced system addresses the fundamental limitations of standard RSI by incorporating macroeconomic factors and market sentiment into its calculations.

Key Innovations:
• Canonical RSI Preservation: Maintains true RSI values within [0,100] bounds using Wilder's exponential smoothing formula, ensuring mathematical integrity.
• Global M2 Integration: Incorporates GDP-weighted money supply data from 5 major economies (US 35%, EU 22%, China 25%, Japan 10%, UK 8%) to capture global liquidity conditions.
• M2 Nowcasting: Employs high-frequency proxy data (Fed Balance Sheet, Treasury accounts, Bank Reserves) to estimate real-time M2 growth, addressing the typical 2-4 week data lag.
• Sentiment Analysis: Processes news articles with exponential recency weighting (λ=0.1) to quantify market psychology and investor sentiment.
• Z-Score Normalization: Applies conditional statistics based on regime identification, providing context-aware signal interpretation.
• Dynamic Thresholds: Replaces static 70/30 levels with adaptive thresholds that adjust based on M2 regime, sentiment regime, and market volatility.


Advanced Features:
• Regime Classification: Identifies 4 M2 regimes (Expansion, Above Average, Below Average, Contraction) and 4 sentiment regimes (Very Positive, Positive, Negative, Very Negative) using percentile-based classification.
• Multi-Asset Support: Automatic asset class detection with optimized parameters for Equities, Cryptocurrencies, Commodities, FX, and Fixed Income.
• Enhanced Backtesting: Includes Sortino Ratio (downside deviation), Calmar Ratio (return/max drawdown), and bootstrap confidence intervals.
• Parameter Calibration: Walk-forward optimization with nested cross-validation and L2 regularization to prevent overfitting.


Signal Generation:
The system generates 7 distinct signals based on both RSI levels and Z-score analysis:
• STRONGLY_OVERSOLD (RSI < oversold & Z < -2)
• MODERATELY_OVERSOLD (RSI < oversold & -2 ≤ Z < -1)
• OVERSOLD (RSI < oversold)
• NEUTRAL (oversold ≤ RSI ≤ overbought)
• OVERBOUGHT (RSI > overbought)
• MODERATELY_OVERBOUGHT (RSI > overbought & 1 < Z ≤ 2)
• STRONGLY_OVERBOUGHT (RSI > overbought & Z > 2)

This comprehensive approach enables more nuanced trading decisions by considering 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


full production-ready capabilities including M2 nowcasting, multi-asset support, enhanced backtesting metrics, and adaptive parameter calibration. Explore the new features using real market data or try our ACME demo.

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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