Cascading Sell Offs Imply A Rebound - But Likely Lower Lows Will Occur Before The Rebound

A have scanned for past times where SPY closed down 3-6 sessions in a row and today the loss was more than 3%.

Out of 24 instances that came up, 21 of them showed at least some intraday loss the following day (meaning price dipped below today's closing price).

17 of 24 made lower lows the next day.

So even though a gap up would be common tomorrow in this situation, the probability is that the gap would be filled and probably a lower low would occur.  But that would be a high alert situation for a rebound rally to begin.

But following today's close, the past instances reflected on average a notable rebound with the peak short term closing gains at 5 days forward.  About 2/3 of instances closed positive at the 5 day forward mark with the average being about 2.3%


So the template here is to expect a lower low tomorrow or beyond, and for that to be quickly followed by a sharp rebound.

From some other scans and comparisons it seems likely to me that after the expected rebound there would likely be lower lows for the move.  My assessment is that it is unlikely that it will go from extremes panic levels of this magnitude and just turn on a dime without a retest and more classic completion of the typical bottoming formation.


Pete