Measuring Market Structure with an RSI of Pivot Breaks

Summary

The Market Structure RSI applies the familiar RSI calculation to counts of broken swing points rather than to bar-by-bar price changes. It identifies simple three-bar pivot highs and lows, then checks whether price has crossed the stored levels. Each broken high adds a positive event and each broken low a negative one; a strong move can break multiple pivots in one bar. The resulting event series is converted into an RSI, with an optional moving average for smoothing.

The indicator is interpreted around 50 as a structural bias: higher readings mean upside pivots have been breaking more often, while lower readings indicate more downside breaks. The document suggests using it as a trend filter, for exhaustion signals near configurable thresholds, to spot divergence, or with a moving-average trend filter. It describes configurable break criteria, smoothing, and signals, but provides no performance tests or evidence that these uses are profitable. Results depend on pivot definitions and break settings, and threshold or crossover signals need independent validation.

Key ideas

• The indicator feeds RSI with counts of broken swing highs and lows instead of raw price changes.
• Three-bar pivots define candidate structural levels, and one bar can register multiple breaks.
• Readings above or below 50 indicate whether upside or downside pivot breaks have dominated recently.
• Suggested uses include trend filtering, exhaustion signals, divergence analysis, and moving-average confirmation.
• The document gives no tested performance evidence, so proposed signals require independent validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.