Monday, June 18, 2012

A New Look At Short-Term Strength After FTDs

Tuesday was a Follow Through Day (FTD).  Despite the fact that it gave inclinations of being a weak one that would probably fail, the market so far is doing well.  In 2008 I showed that performance in the week after a FTD was often indicative ofwhether the attempted rally was likely to succeed or not.  I took a fresh, and slightly different, look this weekend.  Using the current expanded FTD list I looked at performance starting 3 days after the FTDs.  If a rally succeeded or failed before the close of day 3 then it was not included in study.  There were 34 instances that closed under the FTD close on day 3.  Of those, 12 (35%) went on to successful rallies.  There were 46 that closed above the FTD close on day 3 (like Friday).  Of those, 27 (59%) went on to successful rallies.  Not overwhelming odds, but at least notable, and perhaps worth some consideration.

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