Tuesday, January 26, 2010

Poor Breadth On Bounce Somewhat Discouraging

I’ve shown numerous studies over the last couple of years that illustrate weak bounces from oversold conditions are often followed by downside.

A study that appeared in last night’s Quantifinder is an example of this. The study was last shown in the 6/24/09 blog post and is updated below:

Notable about the above study is that 4 of the last 5 instances showed positive returns 5 days out. The one instance that never closed below the entry was the last instance on 11/2/09. Still, the stats are convincing enough that I’m not inclined to completely ignore them.


yessir said...
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yessir said...

Seems to me this would be more accurate to watch the internal s&p 500 components a/d volume, or at least mix some of the nasdaq a/d volume in with the nyse, as the spx is not just nyse based. I ran a similar study with a 50/50 blend of nyse and nasdaq and got very different results. They look fairly bullish but the setup you described was not met yesterday when using nya+naz breadth. here's a screen http://easycaptures.com/fs/uploaded/226/8143828955.jpg