With SPY still sliding down the lower Bollinger Band, I aim to take advantage of the situation with more Bollinger Band what-if posts.
Previous- SPY Closes Twice Beneath Lower Bollinger Band
On Friday, SPY closed more than 1% beneath the lower Bollinger Band. What does this portend for the next several days and the next few weeks?
Rules:
- Buy SPY at the close if it closes more than X% beneath the lower Bollinger Band
- Sell X days later at the close
- No commissions or slippage included
- All SPY history used
Results:
Summary of Results:
Based on these results, a bounce of .75% – 1.0% is expected within the next couple of days. Note that the average next day return for all the tests is greater than 0.5%.
After a bounce, as with the earlier Bollinger Band tests, we should expect more downside. Best case scenario will be that the market consolidates after the bounce.
The results show that the farther the close is extended beneath the lower band, the greater the downside ahead. With Friday’s close a tad greater than 1.0% beneath the band, we are in the sweet spot.
The bottom line is that as long as SPY is sliding beneath the lower Bollinger Band, we should expect the slide to continue. As soon as we get a couple of weeks or three above the lower band, I expect the results 50 days out to look better than they do right now.
$COOL HTF