What does the Relative Strength Index (RSI) indicate?

The Relative Strength Index (RSI) is a momentum oscillator that specifically measures the speed and change of price movements. It is primarily utilized to identify overbought or oversold conditions in the market. The RSI ranges from 0 to 100, and traditionally, a reading above 70 is considered indicative of an overbought condition, while a reading below 30 suggests an oversold condition. This characteristic makes it a valuable tool for traders looking to time their entry and exit points based on perceived market extremes.

The other options, while related to market analysis, do not capture the core function of the RSI. Time series trends focus on the overall direction of price movements rather than the relative strength. Volatility levels refer to the degree of variation in trading prices, which the RSI does not measure. Lastly, while the RSI does reflect the strength of price movements, it is more specifically aligned with identifying overbought or oversold conditions, making the selection of the second choice the most accurate in describing the primary utility of the RSI.