Consecutive Up/Down Days: S&P500 and NASDAQ Composite
Most traders know by now that many U.S. Indexes and ETFs have closed down for five consecutive days or more as of Friday’s close (December 28, 2012). Below is a quick look at two main U.S. Indexes, the S&P-500 and the NASDAQ Composite, and how they performed 1-5 days after closing down 5-days in a row.
Note: Fiscal Cliff talks are in their 13th hour this weekend and could potentially impact market behavior on Monday, December 31st and the following week.
Disclaimer: I realize 2-years is not enough back-test data to base a trade on. Small sample back-testing is done to give traders an understanding of the odds and probabilities involved.
Let’s look at the S&P-500 first. Here’s a two year chart of consecutive up/down days:
The Blue arrow points to the current streak. Yellow arrows note other times over the past 2-years that the S&P-500 has closed down more than 5-days. Here’s a look at how the S&P-500 has performed one day after being down 5-days in a row: