I don’t know if today’s candlestick hammer in the S&P 500 represents the low that will take us back to new highs, but it should come as no surprise if it does. If the market follows the protocol over the last two years then the odds are high that the low is in for now. Over the last couple of days, among other such readings, the market had extreme readings of 20-day lows, stocks below their 50-day moving averages (displayed below), and elevated put to call buying. These are all things hallmark of a market bottom that has led us back to highs since the end of 2012. Regardless, I thought it would be a good exercise to compare the stats of this recent pull-back to the average dip, rally, and time between dips over the last two years.
If the bottom is in then this current pull-back was 4.6% from the highs printed on September 19th. That is very much in line with corrections of the last two years, the average being 5.1%. It lasted 14 calendar days, which is less than the average of 20 days, but also very inline. The correction began 44 days after the low made on August 7th. For reference, the average number of days between one bottom to the next top over the last two years is 54 days. Thus, once again a bit shy of the average but nothing to write home about. Finally, the higher low (meaning the percentage higher the new bottom is from the previous bottom) was only 1.1%. If today was the low it will be the lowest higher low in all previous ten instances, the average being 4.0%. Note the August 2013 higher low came very close having a 1.2% higher low.
Therefore, if today was in fact the bottom of another V-shape reversal, it should come as no surprise to anyone who has been actively participating in the markets since the end of 2012. All the figures I referenced above are very much in line with previous bottoms and were confirmed by similar breadth and oversold readings. Will this time be different?
Without further ad0, whether just for anecdotal purposes, confirmation, or cause you like charts and colors here is your updated V-shape reversal chart plus the data.
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Inside the Mechanics of a V-shape Reversal
If the bottom is in then this current pull-back was 4.6% from the highs printed on September 19th. That is very much in line with corrections of the last two years, the average being 5.1%. It lasted 14 calendar days, which is less than the average of 20 days, but also very inline. The correction began 44 days after the low made on August 7th. For reference, the average number of days between one bottom to the next top over the last two years is 54 days. Thus, once again a bit shy of the average but nothing to write home about. Finally, the higher low (meaning the percentage higher the new bottom is from the previous bottom) was only 1.1%. If today was the low it will be the lowest higher low in all previous ten instances, the average being 4.0%. Note the August 2013 higher low came very close having a 1.2% higher low.
Therefore, if today was in fact the bottom of another V-shape reversal, it should come as no surprise to anyone who has been actively participating in the markets since the end of 2012. All the figures I referenced above are very much in line with previous bottoms and were confirmed by similar breadth and oversold readings. Will this time be different?
Without further ad0, whether just for anecdotal purposes, confirmation, or cause you like charts and colors here is your updated V-shape reversal chart plus the data.
For trade and option ideas check out a subscription.
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