A Rare Pattern Has Formed in S&P 500

The absence of a 2-day winning streak in S&P 500 in a month is a rare pattern that in the past has occurred during severe bear markets or large corrections.

I have already tweeted about this pattern during last week. The chart below marks the recent period of 23 days where there is no 2-day winning streak in S&P 500:


The bottom pane shows the WR(n) indicator for n=2. If there is a 2-day winning streak the indicator value is 100 and if there is a two day losing streak the value is 0. This indicator is the basis for the WR2 system.

This is a rare pattern as shown in the S&P 500 chart since 1998:


The bottom pane displays the day count of periods with no 2-day winning streak. It may be seen that other that the 29-day pattern that formed in the beginning of this year, similar patterns with duration of more than 23 days have formed only during downtrends and large corrections. This pattern is unlikely to occur during a bull market.

Thus, we may be in a large correction or on a downtrend already and the chart is an illusion, or dynamics have dramatically changed. I do not know the answer but illusions are not uncommon in the markets.

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