Market recap for February 24, 2020, after a 3.2% plunge in S&P 500 due to tail risk from virus pandemic fears.
SPY ETF plunged 3.3% below the adaptive moving average AMAV.
Usually when there is a large correction below the AMAV there is continuation. Note that support is near 320.75 and a break below that level could mean a much deeper correction is coming.
The classifier of next day return warned about a possible short-term top but after the plunge yesterday it fell in neutral territory and at this point it does not provide a signal.
Note that there have been 32 occasions when SPY opened with a down gap larger than 2% and closed with a loss larger than 2%. Buying at the close and selling at the next close does not provide and edge based on this limited sample. Win rate is 56.2% and performance is flat after 2011.
S&P 500 index
Despite the plunge, there are still several overbought stocks as shown below.
XEL is overbought for 26 days in a row, which is a new record.
Only 13 stocks from S&P 500 rose yesterday, most from pharma, energy and mining sectors.
All major sector ETfs were down yesterday with XLE (Energy) leading with 4.2% loss.
As expected, utilities (XLU) fell the least but still down 1.17%.
Shorting the market?
Good luck. The most violent rebounds have historically occurred along bear markets and large corrections . Shorts, although right about direction, usually lose due to these rebounds.
As it may be seen from the SPY chart above, almost all daily gains larger than 3% have occurred during downtrends or large corrections.
Charting and backtesting program: Amibroker
Data provider: Norgate Data
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