RUT Down 7 Days In A Row. Gotta Bounce…Maybe?

While SPX and NDX posted small gains last Thursday, the Russell 2000 is now down 7 days in a row. I decided to examine past instances where RUT closed down 7 days in a row and under the 200ma.

RUT returns after 7 down days < 200ma

If you were hoping that 7 consecutive down days put the market so oversold that it “had” to bounce, well, these results would be disappointing. Winners to losers has been basically 50/50 but the losers have been substantially larger. Below is a look at all the instances and their 4-day results.

Buy RUT after 7 down days and sell 4 days later

Quite a few sizable declines in the mix here. The average drawdown over the 4-day period for all 18 instances was 4.6%, and the average run-up was 2.7%. In other words, volatility was high. Seven down days for RUT does not seem to assure us of anything, other than perhaps some additional volatility.

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