This is a guest post by Wayne Whaley, CTA:
After being down 8.58% in the afternoon, we finished the day down 3.24%. I scanned my database for days where we were down 5% or more intra-day and rallied at least a third off the day to finish down for the day. I found four instances. For the intermediate outlook, you could argue that there is actually only two time frames. They were 0-4 for tomorrow, and 1-3 for the next week, suggesting retest of the lows in the next couple of days.
The above would appear to suggest that some backing and filling is in order for a couple of days
There are three statistics that I look for at capitulation bottoms:
5 Day ADT < 19.05 where ADT = ADV/(ADV+DEC)
5 Day UDT < 16.41 where UDT = UP/(UP+DOWN)
5 Day SPT < -13.85 where SPT = 5 day % change in S&P 500
The 5 Day UDT is 18.736. The other two statistics are two days away and a close below 1100. ADT is currently 28.33 and the 5 day percent change in the S&P 500 index is -6.5%. You don't have to have all three at the same time. Any one of the above test out well alone, but would be nice to have confirmation from ADT.
Today’s down volume was 22.8 times that of up volume. It was the fourth day in the last month where we had four “nine to one” down days. There have been no “nine to one” up days since March 5th, just over two months ago. The results were inconclusive, suggesting some more volatility. Here is what happens when we have 4 “nine to one” down days with no “nine to one” up days over a 21 day period:
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