We saw a few examples of positive reversal bars at work in the first quarter. On Monday the market formed a negative reversal bar. Below are descriptions of what I saw in the NDX and the SPY and the action of the market following similar setups in the past:
Choppy trading over the next day or two has led to a downside edge once the market is 3-5 days out from these bars. Combined with the low VIX and the overbought readings of some indicators, caution seems warranted here.
This is exactly what I expected.
ReplyDeleteGiven the recent volatility -- I bet a short here outperforms historic returns.
Great work!!!
ReplyDeleteI ran the same tests for IBovespa (Brazil's index) and got the same results