Wednesday, August 25, 2010

No Turnaround about Wednesday?

Yesterday I showed a study related to Turnaround Tuesdays. I showed that when the market makes 3 down days going in to Tuesday there has been a decided upside edge. Well, that edge certainly did not play out Tuesday. So what happens when Turnaround Tuesday fails to ignite a turnaround? I went back to 1980 for this test to get a good number of instances.

This suggests Tuesday’s failure to turn around simply appears to be a delay rather than a bad omen.


Feanen said...

Does the Tuesday part actually matter? I'm pretty sure that the market almost always bounces after 4 down days in a row.

Anonymous said...

Perhaps it’s both a delay AND a bearish portent.

The concept is one of oversold mean reversion. Any time such setups respond weakly--or late--it's worth squinting at, as to whether it may represent a possible early warning of major trend change or "sea change".

I find the same is true with seasonal strength patterns. If they don't pan out, it sometimes can be a lead warning of longer-timeframe weakness ahead.