Thursday, September 25, 2008

Slowing Rate Of Decline Helps Bullish Case

An interesting aspect of the recent pullback is that while the market has declined each of the last three days, the rate of decline has slowed. (SPX down 3.8%, then -1.5%, and now -0.2%.) I ran a test to study the significance of a slowing rate of decline. First I looked at a baseline test showing all returns after a 3-day decline under the 200 day moving average.

With the baseline set I added the condition that the rate of decline slow the last two days.

The decrease in the rate of decline appears to suggest that selling enthusiasm is waning. Implications are somewhat bullish when compared to typical three day pullbacks.


Keith Shepard said...

Is the short selling ban in Financials adding to slow down in selling?

FrankNYC said...

The number of trades varies by "Sell X days later" column, why? X days is an exit criterion so the number trades which is driven by the buy signal, should not be affected by the exit signal?