Russell 2K Intraday: Probing the 200 Day Lows

536 views

Definitely not a bullish development, especially considering the EU news is being sold hard. Or is it?

The latest 200 day closing low for IWM is at $64.73. As I write this, IWM is trading at $64.57.

My intuition tells me that buying $RUT on the close when it makes a new 200 day low is a bad idea. However, a quick test shows that my intuition is incorrect.

The first trade was on 3.18.1997.

There were only 8 trades that were held the full 100 days.

These results differ somewhat from my research on buying SPY when it is making new 200 day lows.

 

Bear Stew: 200 Day Lows, Range Trading, and 3 Up Days

546 views

Still trying to model this mess of a market. To that end, I’ve crafted a study that accounts for the recent 200 day low, the range trading, and 3 up days in a row.

Less than 30 days ago, the market made a new 200 day low, which portends a bearish future. Since then, the market has traded in a volatile range, and until recently was working through a bear flag pattern. After breaking the bear flag to the downside, the market has closed up, 3 days in a row.

So let’s model that mess.

The Rules:

  • Buy SPY at the close IF
  • SPY made a new 200 day low < 30 days ago AND
  • SPY closed lower than its 30 day closing high AND
  • SPY has logged three consecutive higher closes

No commission or slippage is included. All SPY history was used.

The Results:

So the recipe for bear stew has yielded the flavor above. Tastes bitter to me, with a hint of acrid and a touch of burnt naivete.

Clearly, nothing has changed. Volatility, range-trading, blah blah blah. This is pretty much what I’ve been saying over the past month or two.

You’ve noticed the spike at the end of the time period. I’ve posted a graph of each trade to show when the spike arrived. The results assume each trade was held for the full 100 days.

Note that there were only 10 samples, IF each trade was held for the full 100 days. There were actually 37 occurrences of this setup. The number of samples decreases as the amount of time each trade is held increases. Confusing, I know. Drop me a comment if you need a more thorough explanation.

Anyway, the bottom line is that each bear market ends with a big rally, and 2 of these trades caught a very big rally after 9o days of bear market mania. Not too inspiring for the near term. Personally speaking, 90 days is a long time to wait, especially when after 90 days, fully 6 trades were still in negative territory.

Bottom Line: We are in a bear market. Expect large, volatile swings. There is no evidence that this will be over any time soon.

Russell 2K Intraday: Probing the 200 Day Lows

536 views

Definitely not a bullish development, especially considering the EU news is being sold hard. Or is it?

The latest 200 day closing low for IWM is at $64.73. As I write this, IWM is trading at $64.57.

My intuition tells me that buying $RUT on the close when it makes a new 200 day low is a bad idea. However, a quick test shows that my intuition is incorrect.

The first trade was on 3.18.1997.

There were only 8 trades that were held the full 100 days.

These results differ somewhat from my research on buying SPY when it is making new 200 day lows.

 

Bear Stew: 200 Day Lows, Range Trading, and 3 Up Days

546 views

Still trying to model this mess of a market. To that end, I’ve crafted a study that accounts for the recent 200 day low, the range trading, and 3 up days in a row.

Less than 30 days ago, the market made a new 200 day low, which portends a bearish future. Since then, the market has traded in a volatile range, and until recently was working through a bear flag pattern. After breaking the bear flag to the downside, the market has closed up, 3 days in a row.

So let’s model that mess.

The Rules:

  • Buy SPY at the close IF
  • SPY made a new 200 day low < 30 days ago AND
  • SPY closed lower than its 30 day closing high AND
  • SPY has logged three consecutive higher closes

No commission or slippage is included. All SPY history was used.

The Results:

So the recipe for bear stew has yielded the flavor above. Tastes bitter to me, with a hint of acrid and a touch of burnt naivete.

Clearly, nothing has changed. Volatility, range-trading, blah blah blah. This is pretty much what I’ve been saying over the past month or two.

You’ve noticed the spike at the end of the time period. I’ve posted a graph of each trade to show when the spike arrived. The results assume each trade was held for the full 100 days.

Note that there were only 10 samples, IF each trade was held for the full 100 days. There were actually 37 occurrences of this setup. The number of samples decreases as the amount of time each trade is held increases. Confusing, I know. Drop me a comment if you need a more thorough explanation.

Anyway, the bottom line is that each bear market ends with a big rally, and 2 of these trades caught a very big rally after 9o days of bear market mania. Not too inspiring for the near term. Personally speaking, 90 days is a long time to wait, especially when after 90 days, fully 6 trades were still in negative territory.

Bottom Line: We are in a bear market. Expect large, volatile swings. There is no evidence that this will be over any time soon.