Friday, July 2, 2010

Oversold Short and Intermedaite-term Suggest a Short-Term Bounce

Below is a study from last night's Subscriber Letter. It looks at when happens when ths SPX has been oversold short-term (via RSI2) and intermediate-term (50-day low).



With 8 of 9 instances trading higher and an average return of 2.65% 3 just 3 days later there appears to be an upside edge. Of course this market has been ignoring oversold conditions for several days now. Still, I'd be more inclined to bet on a short-term bounce than against one.

3 comments:

Brad said...

Could you tell me when was the last time Nasdaq was down 10 days in a row? And S&P down 9/10 days? And how did the markets fare over the next 3 months?

Thanks in advance.

Thomas said...

When several studies show odds of a bounce after sharpseveral day declines, and that bounce does not occur, do your studies show a greater likelihood of more downside 1 to 10 day

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