how soon is a bounce coming?
As you all know after today’s huge decline, the market is REALLY oversold now. in fact 49.4% of the market sits 2 standard deviations below the 20 day moving average.
Looking at history to see how close we are to a bounce, looks like we could be very close, but that ultimately there is a good chance the bounce will fail and we will continue down. I looked all the way back to 2004 to see how many times we had 45% or greater of the sp1500 this far away from the previous 20 days price and found only six times. I realize I am grossly over generalizing since we only have 6 occurrences, but I wanted to share the info nonetheless.
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5/20/2010 45.5% of the market below 2 st dev, next day 1.46% bounce, but continued down for roughly another two weeks 2 percent decline
5/6/2010 50.60% of the market, next day dropped another 2%, then bounced roughly 6% over the next three days. Then continued down for roughly 4 weeks for another 6.5% decline (from the close on 5/6) before hitting a bottom.
11/20/2008 53.7% of the market, the next five days produced a huge bounce or almost 19.40% from the bottom. After that the market was basically in a trading range until late January.
10/6/2008 54.6% of the market, the market continued to decline for 4 more days with a decline of almost 15%, then we had a one day big bounce of almost 10%, then the market continued falling for about a month.
7/26/07 52.3% of the market, the next day the market fell another 1.89%, then a one day bounce of 1.33%, then the market continued downward over the next two weeks for a 5% decline (from the close on 7/26/07) before hitting a bottom.
3/5/2007 49.7% of the market, a bottom was made this day and the market rallied for month’s after this. But, the market was already in a huge rally and only paused for 9 days before continuing … definitely not in a range bound market.
I think most will agree, tomorrow will tell another story and will give more clues as to where the market wants to lead us, but for now I sit on the sidelines.
