What The Recent Consolidation Hints At

After the big reversal down last Monday the market has recovered quite a bit.  What is interesting though is that it has closed within the range of that 1 bar every day for the last week.  The bears failed to follow through on that selloff, but the bulls have not managed to move the SPX back out of the range either.  This triggered the study below, which I last discussed a couple of years ago.

Over the last 24 years or so the SPX has burst higher out of this “failed selloff” and consolidation on a fairly consistent basis.  But the implications are only bullish for a few short days.  After that there does not appear to be a decided edge for either the bulls or the bears.  I have a bit of a concern, though.  Technically, the current setup does qualify.  But the last 5 days have been a fairly nice rally.  SPX just barely has missed breaking out of the range, and it has not “felt” like a 5-day consolidation.  So while the study suggests a likely pop higher in the next few days, the likelihood may not be quite as strong as suggested.