Tuesday, February 24, 2009

Another Study Suggesting A Short-term Bounce

Monday marked the 5th day in a row that the S&P 500 closed below its lower Bollinger Band (20 period, 2 std dev). Looking back to 1960 I found only 23 other occurrences. Of those, 22 managed to close higher than the trigger-day close at some point in the next 3 days.

Unfortunately, as you can see from the table below, the edge has been very short-term:

As this selloff has worsened more and more evidence is suggesting a bounce is well overdue. To this point, though, the bounce has evaded us. I expect it shouldn’t be too much longer until we see it.


acoman said...

Which one is the trigger-day? The first or the last day outside BB?


Kevin said...

acoman: Which one is the trigger-day? The first or the last day outside BB?

The trigger-day has to be the fifth day outside the BB, because on the first day you don't know if there will ever be a fifth day.

Roger said...

so is today the 6th day? If so, I would say bounce is near end.

Anonymous said...

I closed my short positions the day before the bounce (or when the bounce started - time will tell). This was based on my own studies but interesting to see that QEdges with CBI etc was suggesting the same thing.

I'm almost certainly going to put my short positions back on now that I'm satisfied that I have dodged the bounce - or some of it.

Rob Hanna said...

The trigger day would have been Monday - the close of the 5th day.

Tuesday's action would count as Day 1 (after the trigger) in the table.