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Interesting day. We had two high probability buys triggered today to add the slew of buys from yesterday. Taken together these two signals, the S&P 500 RSI(2) closing below 2 and the VIX closing above it's bollinger bands for the second consecutive day, shows some very favorable odds. This has only occurred 8 times. While not statistically significant, each time marked a short and intermediate term bottom. The table below show that in every case, the market was up within 3 days. Notable as well, the market was up 20 trading days later in 7 out of the 8 cases.
(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)
When we relax the RSI(2) criteria to look for cases where RSI(2) closed below 10 while VIX closed above it's upper BB(20,2) bands for two consecutive days, we get 36 previous occurrences. In these cases, the market was up 88.9% of the times 3 days later. This is about the same odds had we used the RSI(2) alone. However, where we see better odds by combining these two non-related triggers is looking out 20 days. There, we see that the S&P has historically been up 81% of the time 20 trading days later vs 73% odds with the RSI(2) alone.
Pretty good odds when compared to the the odds of the S&P closing higher on any given day under the same exit conditions over the same data sample period - those odds are 69.6% for a higher close WITHIN 3 days and 59.92% for a higher close 20 days later.
(Note: column '3Day+' displays the number of days it took the S&P to close higher within the next 3 days. a value of 0 indicates the market did not close lower within 3 days)
| Ticker | Date/Time | Close | 3Day+ | %Chg N1 | %Chg N2 | %Chg N3 | %Chg N20 |
|---|---|---|---|---|---|---|---|
| SPX | 8/6/1990 | 334.43 | 1.00 | 0.12 | 1.17 | 1.65 | -3.39 |
| SPX | 1/8/1991 | 314.90 | 3.00 | -1.08 | -0.12 | 0.10 | 11.55 |
| SPX | 9/7/2001 | 1,085.78 | 1.00 | 0.62 | -4.33 | -4.88 | 1.07 |
| SPX | 4/29/2002 | 1,065.45 | 1.00 | 1.08 | 1.97 | 1.79 | 0.85 |
| SPX | 7/23/2002 | 797.70 | 1.00 | 5.73 | 5.14 | 6.91 | 17.52 |
| SPX | 3/11/2004 | 1,106.78 | 1.00 | 1.25 | -0.21 | 0.35 | 2.94 |
| SPX | 8/6/2004 | 1,063.97 | 1.00 | 0.12 | 1.42 | 1.11 | 4.67 |
| SPX | 6/13/2006 | 1,223.69 | 1.00 | 0.52 | 2.65 | 2.28 | 2.85 |
| SPX | 9/2/2009 | 994.75 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
When we relax the RSI(2) criteria to look for cases where RSI(2) closed below 10 while VIX closed above it's upper BB(20,2) bands for two consecutive days, we get 36 previous occurrences. In these cases, the market was up 88.9% of the times 3 days later. This is about the same odds had we used the RSI(2) alone. However, where we see better odds by combining these two non-related triggers is looking out 20 days. There, we see that the S&P has historically been up 81% of the time 20 trading days later vs 73% odds with the RSI(2) alone.
| Ticker | Date/Time | Close | 3Day+ | %Chg N1 | %Chg N2 | %Chg N3 | %Chg N20 |
|---|---|---|---|---|---|---|---|
| SPX | 8/6/1990 | 334.43 | 1.00 | 0.12 | 1.17 | 1.65 | -3.39 |
| SPX | 1/8/1991 | 314.90 | 3.00 | -1.08 | -0.12 | 0.10 | 11.55 |
| SPX | 6/18/1992 | 400.96 | 1.00 | 0.68 | 0.61 | 0.77 | 3.66 |
| SPX | 10/2/1992 | 410.47 | 0.00 | -0.71 | -0.80 | -1.52 | 2.00 |
| SPX | 1/5/1993 | 434.34 | 1.00 | 0.04 | -0.83 | -1.22 | 1.89 |
| SPX | 2/17/1993 | 433.30 | 2.00 | -0.32 | 0.21 | 0.45 | 3.46 |
| SPX | 9/8/1993 | 456.65 | 1.00 | 0.19 | 1.11 | 1.18 | 0.90 |
| SPX | 9/21/1993 | 452.95 | 1.00 | 0.72 | 1.06 | 1.03 | 2.93 |
| SPX | 11/4/1993 | 457.49 | 1.00 | 0.45 | 0.59 | 0.62 | 1.62 |
| SPX | 3/31/1994 | 445.77 | 2.00 | -1.54 | 0.57 | 0.51 | 1.63 |
| SPX | 6/21/1994 | 451.34 | 1.00 | 0.39 | -0.38 | -1.89 | 0.06 |
| SPX | 1/10/1996 | 598.48 | 1.00 | 0.70 | 0.56 | 0.22 | 8.60 |
| SPX | 7/16/1996 | 628.37 | 1.00 | 0.91 | 2.42 | 1.65 | 5.07 |
| SPX | 12/16/1996 | 720.98 | 1.00 | 0.70 | 1.46 | 3.44 | 6.41 |
| SPX | 7/24/1998 | 1,140.80 | 1.00 | 0.57 | -0.93 | -1.37 | -5.22 |
| SPX | 8/28/1998 | 1,027.14 | 0.00 | -6.80 | -3.20 | -3.57 | 2.10 |
| SPX | 9/24/1999 | 1,277.36 | 1.00 | 0.47 | 0.38 | -0.70 | 1.90 |
| SPX | 10/10/2000 | 1,387.02 | 0.00 | -1.62 | -4.13 | -0.93 | 3.23 |
| SPX | 2/21/2001 | 1,255.27 | 3.00 | -0.20 | -0.75 | 0.99 | -10.61 |
| SPX | 9/7/2001 | 1,085.78 | 1.00 | 0.62 | -4.33 | -4.88 | 1.07 |
| SPX | 4/29/2002 | 1,065.45 | 1.00 | 1.08 | 1.97 | 1.79 | 0.85 |
| SPX | 6/4/2002 | 1,040.69 | 1.00 | 0.88 | -1.11 | -1.26 | -8.90 |
| SPX | 7/16/2002 | 900.94 | 1.00 | 0.57 | -2.15 | -5.90 | -1.86 |
| SPX | 7/23/2002 | 797.70 | 1.00 | 5.73 | 5.14 | 6.91 | 17.52 |
| SPX | 1/27/2003 | 847.48 | 1.00 | 1.31 | 1.99 | -0.34 | -1.05 |
| SPX | 11/18/2003 | 1,034.15 | 1.00 | 0.80 | -0.05 | 0.11 | 4.09 |
| SPX | 3/11/2004 | 1,106.78 | 1.00 | 1.25 | -0.21 | 0.35 | 2.94 |
| SPX | 5/10/2004 | 1,087.12 | 1.00 | 0.77 | 0.93 | 0.86 | 5.06 |
| SPX | 8/6/2004 | 1,063.97 | 1.00 | 0.12 | 1.42 | 1.11 | 4.67 |
| SPX | 10/6/2005 | 1,191.49 | 1.00 | 0.37 | -0.35 | -0.56 | 2.39 |
| SPX | 5/18/2006 | 1,261.81 | 1.00 | 0.41 | 0.02 | -0.41 | -0.81 |
| SPX | 6/13/2006 | 1,223.69 | 1.00 | 0.52 | 2.65 | 2.28 | 2.85 |
| SPX | 3/5/2007 | 1,374.12 | 1.00 | 1.55 | 1.30 | 2.02 | 3.67 |
| SPX | 6/7/2007 | 1,490.72 | 1.00 | 1.14 | 1.23 | 0.15 | 2.66 |
| SPX | 7/27/2007 | 1,458.95 | 1.00 | 1.03 | -0.25 | 0.47 | 1.40 |
| SPX | 10/7/2008 | 996.23 | 0.00 | -1.13 | -8.66 | -9.74 | 0.96 |
| SPX | 9/2/2009 | 994.75 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Pretty good odds when compared to the the odds of the S&P closing higher on any given day under the same exit conditions over the same data sample period - those odds are 69.6% for a higher close WITHIN 3 days and 59.92% for a higher close 20 days later.
These studies combined with yesterday's suggest the market has a high probability of closing higher within the next few days and additionally suggests that the market may remain on firm ground looking further out, 1 month later.
If the market continues lower over the next few days despite these occurrences, bears will have made their mark quite strongly.
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