Enhancing the Relative Strength Index with Global M2 Money Supply and News Sentiment: A Context-Aware Technical Indicator

The Relative Strength Index (RSI) is a widely used momentum oscillator in technical analysis, valued for its ability to gauge the speed and magnitude of price changes. However, it faces significant limitations, includ- ing the generation of frequent false signals in strong trending markets, a lack of consideration for broader macroeconomic factors, and reliance on fixed thresholds that fail to adapt to varying market conditions. This paper introduces an innovative enhancement to the RSI, evolving it into a context-aware indicator by incorporating trends in global M2 money supply—a key measure of liquidity across major economies—and real-time news sentiment scores, which capture prevailing market psychology. Through conceptual frame- works, formula adjustments, and practical implementation strategies, we demonstrate how these integrations enable the RSI to better account for external influences on asset prices, such as liquidity-driven inflation or sentiment-induced volatility. The result is a more robust tool designed to reduce misleading signals, extend its applicability across asset classes like equities, cryptocurrencies, and commodities, and provide traders with adaptive insights that align momentum analysis with real-world market dynamics. Future empirical validation and code implementations are proposed to facilitate its adoption in trading systems. Keywords: Relative Strength Index, Global M2 Money Supply, News Sentiment Analysis, Adaptive Technical Indicators, Liquidity-Aware Trading, Smart RSI