An excellent observation. Becoming a good technical analyst requires noticing how the various indices behave and trying to figure them out and even improve on them. Let me pose a question to you ... what rules say that a 14-day base number for the RSI is the correct number to use? I agree that the rest of the world seems to use that number but, I guarantee you there are many technical analysts who have abandoned it in favor of a different number which the arrived at following their own research and back testing which proved to them to be a better number for the way they trade. You may have noticed that I choose not to not to follow blindly in the foot steps of the rest of the world on this one and instead I much prefer to take the advice of Earl Nightingale who said: "There has never been a time in the history of the world when the majority of the people were right." So, in my case, I had always liked the idea that Larry Williams posed in one of his books with a chart of the DOW Jones Industrial Averages where he had plotted all the full moons and new moons on a daily chart of the DOW. That charts proved to me that there was definitely a correlation between the phases of the moon and the up and down cycles of the stock market. In fact, I seem to recall reading somewhere that J. Welles Wilder chose the number 14 for the RSI because it was 1/2 the 28-day lunar cycle. Of course that would not be incorrect for plotting stock charts because the chart is based upon trading days and not calendar days. So, on one of my own research and back testing projects, I chose to test the full Stochastics and the RSI and instead of using the number 14, I wanted to see what the results might be if I based my oscillators on a number that accurately reflected the swings of the lunar cycle based upon trading days. So knowing that there were 252 trading days in a year and that there are actually more than 12 lunar cycles in a year (I believe the correct number is actually 12.3682662), I chose to use the number 20.38 for the Stochastics (a full lunar cycle) and 10.19 for the RSI to reflect a half lunar cycle and take into consideration both the new moon and full moon swings. The results of my back testing on the stocks I was trading at the time, was amazing and I have been using those numbers ever since. You might also notice that a trending stock seems to find support at either the 10 or 20 day moving average while it is trending. Many years ago a market analyst named Donchan created a trading system of buying when the 10 day average traversed up across the 20 day MA and selling when the 10 day average traversed down over the 20 day MA. That system made money for him every single year and he published a book on the subject. I hate mechanical systems because obviously they leave out too may variables that you can not plot easily on a chart so, I always believed that I could improve on Donchan's 10 and 20 day MA trading system simply by being aware of it but, trading based upon my own observation of all those other variables as well. I would highly recommend that you do your own research and see what numbers prove to be the best for your own trading methods. If you want to test my numbers, I can tell you that if you swing trade the way I do, then those number will most likely work for you too. Hope that answers your question.
