An interesting aspect of the recent pullback is that while the market has declined each of the last three days, the rate of decline has slowed. (SPX down 3.8%, then -1.5%, and now -0.2%.) I ran a test to study the significance of a slowing rate of decline. First I looked at a baseline test showing all returns after a 3-day decline under the 200 day moving average.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMWkbiXJPMUYkOuJrXHFmDLwAsrcuZAorO47C_JjARkkJYGZjkJD3ovI4b-jpkXWu0wmn0YdwfVxWe064wZ6v7-g0ObHmL7tdMlxY1Hknsajw5A2NPz6udTQT9MfQPsja1GjdCbjW_kMM/s800/2008-9-25+baseline.PNG)
With the baseline set I added the condition that the rate of decline slow the last two days.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgncZ5x82kTKNXzMSiUX6HSvGiE7cBfJ8aoHhMsh-9GrTG8WEgAdb3crh9tnxQ_mRI5-enkeG3KDJfDFwHcDLe-ODXLHcE9dV1LDyAvBX1d2kT7tBRt2jb3H9PPIxutA7OCg4_Pid195e0/s800/2008-9-25+decline+slowed.PNG)
The decrease in the rate of decline appears to suggest that selling enthusiasm is waning. Implications are somewhat bullish when compared to typical three day pullbacks.
2 comments:
Is the short selling ban in Financials adding to slow down in selling?
The number of trades varies by "Sell X days later" column, why? X days is an exit criterion so the number trades which is driven by the buy signal, should not be affected by the exit signal?
Thanks
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