After Bounces Quickly Fail

Thursday quickly undercut Tuesday’s closing low and put an end to Wednesday’s bounce attempt. How has the market responded under similar circumstances in the past? For the study below, I look at times when a 20-day low was followed by a 1-day bounce and then another 20-day low (when above the 200ma).

2014-09-26 image1

The numbers here look very solid and suggest a bullish edge for Friday. In fact, the setup has done especially well in recent instances. Below I listed the last 18 trades.

2014-09-26 image2

17 of 18 winners is quite the streak.  I will also note that the stats have been substantially less impressive when SPX has been below its 200ma. This edge has only been prevalent during long-term uptrends.


Want research like this delivered directly to your inbox on a timely basis? Sign up for the Quantifiable Edges Email List.