Friday, November 14, 2008

5% Up Days

I recently looked at one-day selloffs of over 5% and found them to have an upside edge. Tonight I looked at rallies of 5% or greater. For the S&P the sample size is small but there has been a bit of a downside bias since 1960:

Of the 11 instances, the only one that didn’t close below the close of the 5% day within the next 4 days was the 5/27/70 occurrence.

Listed below is the one-day performance following all 5% up days for the S&P 500.

A couple of things to note: First, 8 of the last 9 have closed lower. Second, the lower closes have generally been tame – both in relation to the 5% up day and compared to the instances that continued to rise the next day.


PCP said...

The '87 crash skews the numbers. What happens if you take that out or normalize for that somehow?

dhw said...

This market is bizzaro market.

Your 5% down day statistic didn't seem to work that last time.

Maybe the 5% up day statistic won't work this time either?

Anonymous said...

now you can add Friday's significant close lower as well.

Anything 'strange' about friday's close?

Rick B.

Anonymous said...

What about this study?

Although Thursday's pattern seems to be failing, I have thought the pattern should generally be bullish.

Anonymous said...

If you're looking for these studies to "work" I think you're missing the point. They are ongoing guidelines not guarantees. They show historical outcomes that the reader can apply to his or her current technical or fundamental outlook.

This isn't a plug and play idea.