Last August I looked at clusters of large low-volume selloffs. While the S&P hasn’t quite met the parameters laid out in that blog post, it has met the loosened requirements which were looked at in the 8/1/08 Subscriber Letter. The Quantifinder picked up on this last night and I thought it was worth another look. The basic concept is as follows. Strong moves down often lead to bounces. When you have a series of them occur on low volume then you may have favorable risk/reward on the long side.

There appeared to be an upside edge when I ran this test last summer and there still appears to be one.