Big Down Days: A Lesson from Recent History

• Posted by DynamicHedge
• on July 31st, 2014

The $SPX was off by ~2% today so we ran a study of every time that has happened in the last 4-years. It’s pretty easy to ask Market Memory what happens 5-days after a selloff like this. The result is below:

Look closely at the Alpha Curves (pattern recognition algo) showing the most dominant patterns in the data set. The most dominant pattern is for a bit more selling between now and day 5, yet the stats are statistically significant to the upside. Markets usually rally after a big selloff like this, but not before a bit more damage. Key intelligence.

 

Quick note to all the Market Memory users out there. The UI looks a bit different because this is a sneak peak at the next release. Also, there’s a new feature which allows you to exclude the “anchor date” (which is the day you used to describe your study). This has the effect of ignoring what you know (in this case, we already know that the market already went down ~2% so I exclude it from stats and Alpha Curves). Pretty cool, right?

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