As readers are aware, I role historical marketplace patterns to generate hypotheses to bespeak my thinking almost the time to come crusade of markets. Note that the emphasis is on the generation of hypotheses, non the formulation of conclusions. I am using historical patterns every bit a form of heads up, non every bit a origin of mechanical trading signals.
Sometimes a historical investigation volition Pb to no hypothesis whatsoever. That, too, is information.
For example, nosotros accept late seen 4 consecutive weeks of refuse inwards the S&P 500 Index (SPY). It is reasonable to hold off closed to bounce from such oversold conditions. Going dorsum to 1994, however, nosotros honour that, when SPY has been downwardly for 4 consecutive weeks, the adjacent 4 weeks average a attain of .51% (16 up, fifteen down). That does non meaningfully differ from the average four-week modify for the residue of the sample (.45%; 459 up, 315 down).
Interestingly, a careful human face at the information suggests that how the marketplace behaves inwards the 4 weeks next 4 consecutive downwardly weeks is a pretty skillful identifier of longer-term bull in addition to bear markets. In bull markets, 4 downwardly weeks tend to endure followed past times strength; inwards bear markets, the downwardly weeks Pb to farther weakness. In this case, the designing appears to endure non in addition to thus much predictive every bit indicative. (Note: the most recent instance occurred inwards early on March of this twelvemonth in addition to led to 4 weeks of strength).
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