Will The Tea Party Rally Continue?

Based on this particular study, probably.

The SPY is currently stretched just over 3% above the 50 day moving average. Is this bullish or bearish?

Rules:

• Buy the SPY when the close is stretched more than 3% above the 50 day moving average
• Sell X days later
• No commissions or slippage added
• All buys and sells at the close
• All SPY history tested

Results:

Right axis is the % of Winners.

There were 599 instances of this setup.

While a max Avg. % Profit of 0.55% achieved 13 days out suggests that we won’t see much of a big move going forward,  it looks like The Tea Party Rally could continue.

For the record, as we increase the stretch requirement to 4 or 5%, results get bearish, fairly quickly.

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