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Rapid Recovery



The SP has thrown a few headfakes this year but this week's pattern is very rare.

Query: The SP futures post an outside day (higher high and lower low) with a close that is at least 1% below the prior day's low (see "A" in chart) AND then recover within two days to close back above the pre-reversal day's high (see "B" in chart). What happens the next day and then 20 days later?

Result: There were only five occurrences. It's interesting to note that the return was negative 20 days out in four of the five. Also note that the same pattern occurred just prior to October 1987.

No positions in stocks mentioned.

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