I’ve often spoke in the past of the importance of putting smaller patterns into proper context based on larger patterns or trends. In Sunday night’s Gold & Silver Subscriber Letters I showed some studies that exemplified this concept nicely.
The studies looked at the possible impact of 5 consecutive days of SPY making an intraday high. (This triggered at the close on Friday.) I broke it down to see all times the 5 higher highs were accompanied by a 50-day high versus times they weren’t. First let’s look at times where 5 higher highs occurred without a 50-day high.
Stats over the 1st few days suggest a possible downside edge. After 5 higher highs the market will often need a breather.
But what of times (like Friday) when a strong uptrend exists and the market is also making a 50-day high? Those stats can be found below.
Interestingly, the number of instances was exactly the same. But with an intermediate-term rally also occurring the tendency to pull back no longer exists. So 5 higher highs do not appear to suggest a bearish edge in situations like the one that set up a few days ago.