3-9-20 Stock Market Update and Expectation

The snips here show the results of a scan on past instances in SPY when it was down more than 6% in a day.

SPY only goes back to the mid 1990's, so it is short sighted in terms of history, BUT the data does include a couple of the largest bear markets in history, so it could give us some useful guides.

The implication is that there is about a 2.6:1 greater upside potential over the next 3 days compared to downside.  This is quite strong.  Note that basically all past instances increased 5% or more at some point over the next 3 days.

The lower table shows that all instances made a positive close above the signal day (today) over the next 5 days at some point.  But all of them also showed 2 higher closes over the next 5 days.

And that strategy has given the higher return compared to exiting on the first positive close.

Also note that all prior instances declined at least a little, tiny bit further over the next few days.  In fact looking at the next day's data only (not shown here), all of them made at least a slight loss during the next session.

So the point here is that this is an exceptionally volatile market, but is presenting an exceptionally high reward over the very short term.  If not in the market, a simple strategy would be to enter tomorrow at a limit of today's close.  

Then exit at the first positive close or second positive close OR after 5 days if not profitable.

Average future return peaked at a 5 day hold on this set up.

That also fit with short term cycles which suggest a 3-4 day short term advance is due.  But after than, there may be further downside or retest of the lows.