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Strategies & Market Trends : Tech Stock Options
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To: donald sew who wrote (48374)7/24/1998 1:07:00 PM
From: Stoctrash  Read Replies (2) of 58727
 
More wild backtesting...

7.24.98

Recently we have seen the following in the US equity market:
1. Four days ago, the S&P 500 made a new 52 week high.
2. The S&P 500 has been down more than 1.5% two of the past three trading days.
3. The Dow Jones Industrials declined aggressively and it was not a Monday or Friday (like it has been on so many other big down days.)

When you dump it all into JMIM, the results are interesting to say the least. It turns out that the day after the big drop in the Dow (OR the second large decline in the S&P), the low of the Dow is over 2% below (on average) the low of the prior day in 93% of 15 past occurrences. However, the Dow does not STAY down despite making the aggressive new low. In fact, the Dow sometimes closed up on the day after an aggressive decline. (See column CLOSE) Specifically, the Dow closed this volatile day, on average, 1% above it's intraday low. (D_off_low)

History then shows that the Dow forms a base and then proceeds to rally over 4% on average over the next three weeks and it's more of the what-else-is-new scenario from a historical perspective. (3_week)

We find these query results intersting for the following reasons:

1. There is strong support between 1130 and 1110 in the S&P 500.
2. This type of trading phenomenon is what is implied by the now famous 200 analog of the S&P 500. If you look closely at what happened back in 1987, a dip preceededed the final violent run up just before big one.

Something to think about from LIM Research.

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