Friday, June 20, 2008

A Lame Reversal

In one of my first blog entries I looked at S&P 500 reversal bars that made new 20-day lows and then rallied strongly to finish the day up 1% or more on higher volume. A key ingredient in that study was the 1% price rise. While the market put in a reversal Thursday on increased volume the price rise was not that impressive. The first table below is the one from January’s study:

This next table shows what happens to reversal bars with unimpressive price advances like Thursday (again 1978-present):

The January study showed a clear edge to the upside from an average trade standpoint. That edge disappears when the reversal is weak. Doesn’t look like Thursday’s action is anything to get to hyped about.


Anonymous said...

appears to be... future are getting kill right now spx at fresh multi-month low... but interesting is why nasdaq is so strong? I mean we are not even near last thursday's low... we are only back to yesterday's break out area...

Anonymous said...

I'm curious how the inclusion of 73-74 would alter the results. Should be a lot of failed short covering rallies in that period that would fit the criteria for this study.

To me Nasdaq, and the RUT, is influenced to a much greater degree than the NYSE by the level of public participation, the appetite for risk vs fear, and growth vs value. As of this morning it looks like only 1 of those 3 is still in its favor so outperformance to the downside will likely return.

Anonymous said...

be interesting to see what the CBI reading is today! Are we close to a temperary bottom? ISEE is getting low and CBOE is breaking out, so maybe soon to capitulate?

Anonymous said...

we've got alot of old trader axiom buys again right now, for example closes of TRINQ 2.49 and equity p/c 1.29... let's give it a throw at the monday low!
short covering into fomc decision weds. is the norm...the almanac states 'On June 26 look for the 12- Day Midyear NASDAQ rally to commence.'...last thursday QQQQ went over 49.00 on greater than 200mil shares, wyckoff traders say we have to retest that high, no telling when.