Wednesday, August 15, 2012

Is The Recent Consolidation Bullish?

The range over the last week has been extremely tight.  Every SPY close in the 5 days since 8/7 has been within the daily range of that 8/7/12 bar.  It is said that consolidations are often resolved in the direction of the trend.  This guideline suggests that we’re more likely to see another leg up from here than a breakdown.  The study below puts this to the test.

It certainly appears the old technical adage has some merit.  Results favor the long side over the immediate 3-day period and they are even more impressive when looking out 8 to 10 days.


Adam Keeling said...

Beware the power of Options Expiration, especially it's ability to hold prices in an extremely tight range before the coil unwinds. he amount of churning and stalling at current index levels, mainly the S&P and Russell, demonstrate to some the imminent move higher, but keep in mind that new highs have severely contracted in this run up, light volume of August, and the VIX isn't cooperating. I'm not forecasting a a blow out to the downside, but the probabilities are in favor of some selling, most likely starting next week.

Mike D said...

Where's your math, Adam.