Despite the strong move higher over the last several days, the market has been consistently producing bullish studies. At Tuesday’s close I noted the first bearish study to trigger in a while (using the Quantifinder). It is an interesting one so I thought I would share it on the blog.
The market has seen a lot of strong finishes lately. When it consistently closes near the high of the day it suggests optimism on the part of traders. This optimism is now at a level that suggests it is a bit overdone and there is a good chance of a pullback. The study below exemplifies this concept.
Downside risk appears to be reaching a level that the market will often experience a brief pullback. But while the downside edge appears to remain in place for a full week, most of the edge has been realized over the 1st 2 days.
3 comments:
Interesting study, thanks, but what does "8-day average closing range of SPY crosses over 75%" mean? Not sure how to compute that one....
Sorry for the slow reply. I am simply measuring where in the daily range SPY closed each day. For instance if it traded at a low of $134.00 and a high of $135.00 and closed at $134.75, then it would have closed in the 75th percentile of the daily range. A close at $134.50 would have meant 50%.
I them take a simple moving average of the last 8 days. If that average goes from below 75% (where it usually is) to above 75%, the study is triggered.
Best,
Rob
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