How Often Does RSI Stay Oversold for More Than 5 Days?
The Relative Strength Index (RSI) is a go-to tool for traders, signaling when a stock or index might be overbought or oversold.
But what happens when the market stays in that oversold zone for an extended period? Specifically, how often does the 5-day RSI stay below 35—a common oversold threshold—for more than 5 days?
To find out, we analyzed SPY, the ETF tracking the S&P 500, from its inception in 1993 until today. The answer: it’s happened just 50 times. Let’s dive into what this means, why it matters, and how traders can use this rare signal.
What Does “Oversold” Mean in This Context?
First, a quick refresher. RSI measures momentum on a scale from 0 to 100, with readings below 35 typically labeled as oversold—suggesting a security might be undervalued or due for a bounce. For a deep dive into RSI, please read our RSI guide.
For this analysis, we used the 5-day RSI, a shorter timeframe that captures quick shifts in market sentiment. Staying below 35 for more than 5 days isn’t just a dip—it’s a prolonged slump, hinting at deeper fear or selling pressure.
With SPY as our lens—the S&P 500’s trusty proxy—we tracked every instance of this since January 22, 1993, when SPY began trading.
The Numbers: 50 Rare Events in Over 30 Years
After crunching over 30 years of data—roughly 8,000 trading days—we found that the 5-day RSI stayed below 35 for more than 5 consecutive days exactly 50 times. That’s a mere 0.625% of all trading days.
These 50 occurrences aren’t spread evenly. They tend to cluster around moments of heightened volatility or outright panic. Think major corrections, bear markets, or black-swan events. The rarity alone makes it worth a closer look.
Why Does This Matter for Traders?
So, 50 times in over 30 years—why should you care? Because rarity signals opportunity. When the 5-day RSI lingers below 35 for more than 5 days, it’s a heads-up that the market is in an unusual state.
For contrarian traders, it might scream “buy the dip.” For risk-averse ones, it could mean “wait and watch.” The key is context: pair this signal with volume, news, or broader trends to gauge what’s next.
That 0.625% frequency also underscores how fleeting normal oversold conditions are. Most RSI dips below 35 last just a day or two—longer stretches suggest something bigger is brewing, whether it’s capitulation or a slow bleed.
Limitations and Next Steps
This analysis isn’t a crystal ball. RSI is just one tool, and staying oversold doesn’t guarantee a reversal—or a crash. Plus, our focus on SPY reflects the broad market, not individual stocks, which might behave differently.
Want to dig deeper? Go and backtest yourself and tweak the threshold and settings (say, RSI below 30 or using different lookback periods) to see how the numbers shift.
Oversold strategy
You might be thinking: “Cool stats, but how does such a trading strategy perform? Did the market bounce back? Or keep tanking?”
Let’s make the following trading rules: we buy when the 5-day RSI crosses below 35 and we sell when the RSI crosses above 35. We get the following equity curve:
The results are not the most inspiring, but they show at least steady growth. There were 336 trades, and the average gain, including commissions and slippage (0.06% for a roundtrip), was 0.35%.