Tuesday, May 12, 2009

Extremely Small Range and a Down Close

So here’s a little something that came out of the Wayback Machine last night based on yesterday's action:

This test suggests the setup has somewhat bearish implications. There are a few things to note here that aren’t evident in the above table. First, 24 of 29 instances (86%) saw the SPY close below its trigger day close at some point in the next 4 days. This is quite a high number. Interestingly, the last 2 times it has occurred, 4/7/09 and 5/5/09, it has led to swift rises and there was no lower close. That speaks to the power of the recent up move from the March lows.

Below is an equity chart from Tradestaion that shows the results using a simple 5-day holding period. You can see the sharp spike that occurred with the last 2 instances.

1 comment:

Daniel said...

"That speaks to the power of the recent up move from the March lows."

Yes, emphasizing the importance of always keeping a Breadth Thrust Continuation signal in one's econometric arsenal.

In baseball terms, they are like a .230 hitter who also clouts 37 home runs. Hard to win with just such players, but a heck of an RBI producer in some circumstances...