Thursday, December 29, 2011

When SPX Drops Hard After A Steady Drift Higher

Wednesday’s selling followed a slow drift higher and wiped out a few days worth of gains. Below I show results of the 30 instances since 1982 where 3+ days of gains were erased after a rally of 5+ days.

These results appear to provide a solid upside edge over the next 1-10 days. In the past such-give backs after a steady rise have not suffered substantial additional selling. Instead they have often been followed by a resumption of the move up.

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