Usage
Macro Sentiment Index Usage
Interpreting the Index
Above 0: Net risk-on sentiment (Markets favor growth, liquidity, and speculative assets)
Below 0: Net risk-off sentiment (Flight to safety, rising volatility, defensive positioning)
Above +1: Extreme risk-on / complacency (Potential overheating or topping pattern)
Below −1: Extreme risk-off / fear (Stress, capitulation, or strong defensive rotation)
Trading Applications
Trend Confirmation
Use MSI to validate equity or crypto trends. A rising price with rising MSI confirms momentum.
Divergence Detection
Price makes new highs but MSI trends lower → bearish divergence.
Mean Reversion
Extended stays beyond ±1 may signal overbought/oversold conditions.
Regime Filtering
Avoid long-only equity positions when MSI is deeply negative.
Sector Rotation
Combine with XLU/XLY or XLP/XLY ratios for defensive/offensive shifts.
Volatility
Falling VIX/VVIX ratio + negative MSI suggests suppressed volatility before a spike.
Configuration Tips
Shorter lookback (20–40): More responsive, suitable for tactical trading
Longer lookback (80–120): Smoother, better for macro regime identification
Enable MA smoothing (50-period EMA): Helps filter noise in choppy markets
Increase weights on VIX, MOVE, TED, and HYG for crisis detection
Increase BTC, SOXX, QQQ weights to emphasize tech and crypto liquidity
Chart Setup
Add the indicator to any asset (e.g., SPX, BTCUSD, EURUSD) but interpret within context:
On SPX/SPY: MSI reflects broad equity risk appetite
On BTCUSD: MSI captures global liquidity and risk flow into crypto
On USD/JPY: Helps assess carry trade dynamics
Best Practice: Run MSI on a daily chart for macro clarity, or 4H/1H for tactical entries.
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