Yesterday was a grinder lower. Â The bears just wore the bulls down slowly grinding the market slower. Â All the volume was to the sell side, which created a 90% Down day. Â This is when 90% of the total market volume is down. This typically marks a sort ofÂ capitulationÂ and a overselling, where the market rebounds after it. Â Here is a un-updated list of using the 90% StrategyÂ that discuss the returns in greater detail. Â Below is the last 5 90% down days, thatÂ occurredÂ this year.
Below is a chart showing the last 90% down days. Â Three of the last five times the market has gone on to rally the next couple of days.
Here is the P/L of the trading startegy of Buying on the close of the 90% day and selling on the close of the next day.
Here is the P/L if you hold it for 5 days:
P/L = $1,663
The most important thing to watch for to see if this is marking a bottom is the follow through today. Â If there is continued weakness in the market, look for more downside. Â If the bulls can get a bid here, there are strong odds the market will rally.
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