A Past Study That’s Struggling In The Current Environment

An astute reader of the blog pointed out a study from March that suggested a bullish bias when there was two 3.5% up days within a 10-day period. The bullish bias did play out in March as the market rallied over the ensuing weeks. Since then the setup has triggered on 9/19, 10/13, and 10/28 – all of which have been miserable failures. One issue when considering this study in the current environment is that 3.5% isn’t a substantial move.

As I discussed in Thursday’s blog, the average true range percent in the Dow over the last 30 trading days has been over 6%. That’s not to say that Thursday’s reversal bar isn’t a positive one. Things to look for generally include a strong move higher, strong volume, and strong breadth. Thursday qualified in all areas. Against the current backdrop I’ve been looking for a bit more confirmation. Tests have been mixed.