Technical indicators under pressure: Performance and limitations in the face of market shocks

This article examines the impact of geopolitical events on the reliability of technical indicators used in trend-following strategies. Using a database composed of daily series of several financial assets covering the period from January 2019 to November 2020, the study compares the behavior of indicators such as MMS_50, MME_20, RSI_14, MACD, and Stochastic %K between stable market conditions and periods of crisis, particularly those related to the Covid-19 pandemic. The analysis, performed in Python, reveals a marked deterioration in signal quality during periods of crisis: moving averages become less responsive, MACD loses consistency, and oscillators such as RSI are overused, which can generate false signals. Internal correlations between indicators are also altered, suggesting a break in the usual technical dynamics. A simple regression confirms the significant effect of preference on the trend, as measured by the MMS_50.