Tuesday, April 8, 2008

A Look At Some Negative Reversal Bars

We saw a few examples of positive reversal bars at work in the first quarter. On Monday the market formed a negative reversal bar. Below are descriptions of what I saw in the NDX and the SPY and the action of the market following similar setups in the past:

Choppy trading over the next day or two has led to a downside edge once the market is 3-5 days out from these bars. Combined with the low VIX and the overbought readings of some indicators, caution seems warranted here.


Anonymous said...

This is exactly what I expected.

Given the recent volatility -- I bet a short here outperforms historic returns.

Sandor Tucakov Caetano said...

Great work!!!

I ran the same tests for IBovespa (Brazil's index) and got the same results