eResearch| The RASI at the close on Wednesday, September 4 is at 362, which is up from 257 on Tuesday last week, but it continues to record below the critical 500 level. The Index needs to be above 500 in order to generate a positive market expectation.
As shown in the chart below, RASI staged a sharp rally beginning in the last week of December and topped out near the end of February. Since then, RASI has recorded lower highs and lower lows. It may have bottomed recently, or this may just be a breather on a continuing downward move. The 500 level demarks the dividing line between Positive and Negative market expectation. The RASI Index has proven to be a good predictor of where the DJIA will go, as reflected in the top part of the chart where the DJIA is recorded.
Conclusion: The downward-trending wavy A-D line is currently trying to build a base around the 250 level. This is above the 200 level that it reached at the beginning of June, so this is encouraging. However, at its current 362, it remains well beneath the benchmark 500 level, below which denotes Negative market expectations.
RASI Explained:The Ratio-Adjusted Summation Index, RASI, is a market indicator developed by Tom McClellan of McClellan Financial Publications. A RASI reading that rises to and reaches a specified level (500 and above) can be a signal that a new market up-trend is starting. The +500 level is an important dividing line for the RASI, in terms of giving a go/no-go signal about the new up-trend. When a rebound in the RASI occurs, but it falls short of getting up to the 500 level, historically that has meant trouble lies ahead. But zooming well above 500 is a sign that there is a lot of strength behind the move, and the higher it goes above 500, the more emphatic the message of strength. Conversely, a move from well above 500 down to and below 500 is a signal that the market is weakening and that it should move lower.
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