Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Two Sides to Every Coin



What happens when the "counter-trend Tuesday" chatter gets too crowded? Yesterday's late day weakness speaks for itself. The fact that yesterday closed lower despite historical patterns suggesting otherwise, raises the potential for an "outlier" move. Today I'm going to show the potential for both sides of the coin.

If we just look at SP futures performance on a Wednesday where Tuesday closed lower and the preceding two days closed down more than 1%, then the bias is again quite bullish for the day's close. There were eight occurrences and the next day closed higher in all eight. This is slightly different than yesterday's query in that I removed the stipulation that the down 1% days failed to trade positive. The results are listed below:

Given yesterday's late day weakness and lower close, today is a perfect reminder that PAST PERFORMANCE DOES NOT INDICATE FUTURE RESULTS. When markets don't do what they should do, they are often talking.

This brings us to the "outlier" potential. The table above clearly shows a bullish bias to the day but here's the other side of the coin. The SP futures posted an inside day yesterday and posted a new 30 day low close. When this pattern follows a breakaway gap (the day's high is lower than the prior day's low), I found only one occurrence and the next three days were decidedly bearish. To illustrate the degree of risk currently in the market, I've provided the chart of both today's SP future and the chart of the occurrence just mentioned.

What does all this mean? I present these historical probabilities with the intent of helping to provide a "roadmap" for the day's trade. It's important to understand the risks in the market and yesterday's late day weakness clearly raises the "risk" element despite a historically upside bias for the day's trade.

Past performance does not indicate future results.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos