Adam Warner reports that in 2007 selling rallies and buying dips in the stock market was better than buying on strength and selling weakness.
>> Warner quoting Dr. Brett (link):
When the S&P 500 Index (SPY) has been up for the past one and three days, the next three days average a loss of -.30% (80 occasions up, 83 down). When SPY has been down for the past one and three days, the next three days average a gain of .22% (82 up, 51 down). If traders wait several days for a trend to assert itself and then jump on board, they are likely to start in the hole.
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This is in contrast to what worked for 40 years:
>> Warner quoting Rob from Quantifiable Edges
... "buying after strong days and selling after weak ones worked well for 40 years. In 2000 that changed, and the last year and a half is the worst it has ever been with regards to follow through."
>>
Markets do change. When a pattern becomes widely known, it often stops working.
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