Using Smoothed RSI to Track Unemployment Momentum

Summary

This model applies a short-period Relative Strength Index to the civilian unemployment rate and smooths that RSI with an exponential moving average. When the smoothed value crosses above a trigger level, the script enters a long state; a cross below triggers a short state. The accompanying explanation frames unemployment as a macroeconomic series that can rise sharply and then decline more gradually, making momentum timing a possible way to interpret changes in its direction. Other suggested timing tools include moving-average crossovers, MACD, and rate of change.

The series is published by FRED, and the document explicitly says unemployment itself cannot be traded directly. The script is therefore an economic monitoring illustration, not a directly executable trading strategy on the unemployment rate. It reports no backtest findings, predictive accuracy, or connection to returns in a tradable asset. The chosen RSI, smoothing, and trigger settings are inputs, and the document does not establish that they are robust or useful for forecasting economic conditions.

Key ideas

• The model applies RSI to the civilian unemployment rate and smooths it with an EMA.
• Crosses of a trigger level create rising and falling directional states.
• The rationale is that unemployment may rise quickly and decline more gradually.
• The unemployment rate is not directly tradable, so the model is an economic indicator illustration.
• No predictive results or tradable-asset performance evidence are reported.

Tags

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