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S&P500 vs 3 Month Lows; 90% Up Days

Posted By Barry Ritholtz On November 20, 2012 @ 11:16 am In Contrary Indicators,Markets,Technical Analysis | Comments Disabled

Interesting data point from Jason Goephert, Sentiment Trader [1]:

There have been 9 other times the S&P 500 tracking fund, SPY, hit a three-month low, then the next day opened for trading at least +0.5% above the previous day’s high and closed at least +0.5% above the open.  7 of the 9 led to gains over the next three weeks. The two failures were both in the summer of 2002.  Overall, it was a good multi-week kick-off signal.

Then there is this from Merrill’s Market Analysis research team:

 A 90% up day is bullish on average 10 to 65 days out

Yesterday’s (Nov 19) 2.0% rally in the S&P 500 was confirmed by a 90% up day on the NYSE. Since January 2006, there have been 62 90% up days out of a total of 1733 trading days – 90% up days have occurred only 3.6% of the time. After a 90% up day, the S&P 500 has below average 1, 2, and 5-day price returns and well above average 10, 20, 30, and 65-day returns.

I am not sure what this means going forward, but they are the other side of my view.

 


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[1] Sentiment Trader: http://www.sentimentrader.com/subscriber/comments/2012/sentiment_report_20121119.php

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