Late Day Reversal Flips S&P To Negative

We’ve seen before how strong end-of-day selloffs are often an overreaction. Frequently this means a bounce back over the next day or so. Tonight I looked at the below situation, which describes Wednesday's action:



Instances are low, but the results are interesting. The pattern is a sharp bounce followed quickly by another drop lower. Of the 9 instances, 8 of them closed higher than the entry trigger at some point in the next 3 days. Amazingly, 7 of 9 closed lower than the entry trigger within 4 days. Looking out 6 days would move the number to 8 of 9 and if you give it 6 days, then all 9 instances closed lower at some point. What I see is a propensity for violent chop over the next few days.