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:
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.
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ReplyDeleteSeems 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
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