RSI Hits 70 – What Happens Next?

Imagine this: the RSI just hit 70. The charts are screaming ‘overbought,’ and everyone’s asking the same question: What happens next? Is it time to sell, hold, or double down?

We have crunched the numbers and backtested the data on the ETF that tracks the S&P 500 and the gold price.

Let’s first look at SPY, the ETF that tracks the S&P 500. What happens when the 5-day RSI crosses above 70? We look at the performance from one day to ten.

The first column shows the results in rows when we sell after N days.

For example, if we sell after 3 days, the return is minus 0.17% per trade. So, if you buy when the RSI is high, you can expect poor returns over the next 10 days.

Is gold any better? Let’s look at GLD, the ETF that tracks the gold price.

The return is not fantastic, but it’s a lot better than for the S&P 500. The best returns are after 8 days when you get an average of 0.28%.