Tuesday, October 11, 2016

Another Small Sample Bearish Study Triggering Today

I ran a scan which looked at

  • daily 14,3 stochastics crosses down from above 50
  • weekly MACD is down
  • daily MACD is down
The results showed 20 instances going back to Sept 1995.  The MAX loss was 4 times as large as the MAX gain over the next 2 weeks.  This signal is occurring today.

When I added the conditions of the daily MACD line being below 0, the results were also very bearish.  And when I added the additional condition of today being a cross down on the daily MACD (from below 0 still) there were only 4 instances going back the 21 years.  

Dates were

8/27/1998 - ~9.5% loss within 3 days
10/4/2005 - ~2.5% loss within 3 days
8/19/2015 - ~12.5% loss within 3 days
9/26/16 - sideways trade for 2 weeks

So check these on your chart.  The most recent one 2 weeks ago led to nothing of significance.  Just a historically unusual sideways pattern.

But the other 3 had massive skews to the bearish side.  About 10:1 skew to the downside over the next 2 weeks.

I know it is small sample size.  But may be of note.

Some other studies looking at volume increases and price declines similar to today show a mild to moderated bullish picture for 1-2 weeks on average.

So it seems like the most probable scenario is a modest rebound over the next 1-2 weeks back up into the range we've been in.  But there may be a greater than typical risk for a quick sell off of large scale.

I will keep this under watch and post if there is relevant info to follow.


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