Sunday, July 26, 2015

3 Day Rally Probable Beginning Early This Week

Click on Stats to Enlarge

This past week showed 4 closes down in a row from Tuesday through Friday in the SPY etf.  I sorted data going back to 1995 with 4 closes down in a row and added a couple filters to see what we may expect here.

Additional filters were:
  • that the quarterly moving average was above the yearly, indicating an established bull market
  • The 4th close down was greater than 1% (which occurred Friday also)
The average close 3 days later was up 1.26%.  The stats above show the trade expectancy stats of all the 37 instances.  The win rate was about 75%.

So for an equity trader here, there is a clear bias to the upside through Wednesday's close.  I would suggest that a limit order of 207.48 (equivalent to the large gap fill from 7/13/15) could be used as an entry order, with the trade closed out at Wednesday's close.

The average max gain to max loss shows a bullish skew in all time frames out to 6 months.

 Click to View Enlarged Stats

The table here does not capture quite all 37 instances but does show the averages max gains and loss across the time frames.  This data would fit with the idea that the current market action is a major consolidation in a bull market with the next dominant move to the upside.

From my perspective I believe another move to new highs would be ideal before a new possible bull market top could form.


No comments:

Post a Comment