Why The Failed Bounce Is Not A Signal To Sell

After closing at a 20-day low on Thursday, the market put in a bounce attempt on Friday. Monday’s decline to a new low meant that initial bounce attempt failed. But in last night’s subscriber letter we saw several studies that showed the “failed bounce” was more likely to see another bounce attempt than it was to sell off further. The study below triggered in yesterday’s Quantifinder, and it is one of the “failed bounce” studies we looked at.


The stats here are suggestive of a bullish edge looking out over the next 1-4 days. Monday was disappointing for the bulls, but the studies I am seeing suggest such a disappointment has typically not been a good time to bail out of long positions. The odds favor another bounce attempt triggering soon.


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