Thursday, October 13, 2016

Another Small Sample Study Showing Potential For Sizeable Sell Off - 10-13-16

Click on Chart to Enlarge

Today as of the open, SPY is opening below the lower bollinger band.  With no other filters, this is a neutral occurrence in terms of forward returns based upon backtesting.

Adding a stochastics fast line to be below 20 still shows a pretty neutral forward skew of max gains vs losses.  

But the table above adds just one filtering criteria which is that the previous day closed UP.  In our current case SPY made a small close up yesterday and closed above the bollinger band.  Now today we are seeing an oversized gap relative to the range in order for it to open below the lower bollinger band.  

In the past instances, the table demonstrates another significant skew to the downside in the short term.  In this case, as with the study on MACD and stochastics crossing down on the same day, we see some pretty sizable short term sell offs beyond random MAX draw downs.

Now most of the losses occurred in the first 3 days proportionally.  So, I am just making further noted here that we could see a swift decline.  But that decline would very likely produce some back test studies which offer bullish trade opportunities.

Again this is a smaller study, and stocks certainly could rally right fro mthe open, but be aware of the context here and possibility for sell off.


No comments:

Post a Comment