Short-Term Rebounds Along Downtrends Are Common

The S&P 500 gained 3.63% in the last two trading sessions. About 75% of back-to-back gains of more than 3.62% have occurred along downtrends. Therefore, a case for a bottom cannot be based solely on performance.

Definitions for the purpose of this analysis only:

Uptrend: Price is above the 200-day moving average
Downtrend: Price is below the 200-day moving average

Here is a chart of S&P 500 since 1950 with the statistics:

SPX_2dRet_201602016

It may be seen that 73.85% back-to-back gains of more than 3.62% have occurred along downtrends, i.e., this performance is common when markets are falling. The sample size consists of 195 back-to-back returns greater than 3.62%.

Therefore, strong rebounds along a downtrend cannot be used to support a potential bottom formation.

Subscribe via RSS or Email, or follow us on Twitter.

Charting and backtesting program: Amibroker
Disclaimer

Detailed technical and quantitative analysis of Dow-30 stocks and popular ETFs can be found in our Weekly Premium Report.

PAL_Software banner

Copyright Notice

marketsignals banner

FacebookTwitterGoogle+PinterestHacker NewsTumblrLinkedInBlogger PostDeliciousDiggEmailRedditMySpaceWordPressWhatsAppYahoo MailShare
This entry was posted in Market Statistics and tagged , , . Bookmark the permalink.

Leave a Reply