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Gaming a Pullback



End of Streak

It's time to move on. The streak ended yesterday as the SPX closed the books on a new record 15 consecutive higher lows on the daily chart. The question now is to what degree the market will pull back and whether or not Monday's high is significant? Regardless of your view, historicals suggest at least one move higher before any material correction. In a prior post, I highlighted 5 prior examples where the SPX posted at least 12 consecutive higher lows. Here's a reminder: From the close on the day those streaks ended, the SPX was higher 5 and 10 days later each time.

Day After the Counter-Trend Tuesday

Several traders described yesterday's trade as a classic "Counter-Trend Tuesday" since the SP futures gapped lower and remained negative throughout the day. Historically, a "red only" Tuesday that comes on the heels of consecutive new high closes is bullish. I looked for "red only" Tuesdays that followed 60 day high closes in the SP futures on the preceding Friday and Monday. In total, there were just eight occurrences. As the results indicate, Wednesday's close was positive. As well, the forward performance was generally positive.

Past performance does not indicate future results. On Friday, I'll post the historicals surrounding Thanksgiving week.

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