Pardon the interruption

• Posted by DynamicHedge
• on October 24th, 2014

The chart below is from a report I ran on early in the week while watching, in mild disbelief, the market march higher. The study examines all post-crisis corrections exceeding -7.5% downside in 20 days. The sample was small, but the result was timely and useful in managing expectations of what a bounce might look like (despite what we may have been feeling). The more I use the Alpha Curves, the more I am able to internalize the various options and paths the market may take. My apologies for not sharing publicly (but the tool is available to anyone).

Going forward, if we assume the market is following the dominant bounce pattern (pattern rank 1), the pattern shows the $SPX tends to trend for 7-9 sessions and then back and fill (giving up significant gains). We are currently in day seven off the lows of $SPX 1820. Uninterrupted post-correction highs cannot continue without pause. If you are super bullish, you could talk yourself into pattern 3, but I don’t think it fits.

Nothing can predict the future. Model, anticipate, and adjust along the way.

If you’d like to see the parameters we used to create the report, click HERE.

 

Analysis by: https://www.marketmemory.com/

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