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A ‘failed bounce pattern’… The S&P trades down hard intraday then rebounds sharply into the close, like we saw on Friday. The next day the entire bounce is undone and the S&P closes below the prior day’s low, like we’re seeing today. It sounds bad, but in reality this often reflects bottoming action. Over 21 occurrences since 1990, all but five led to a higher S&P500 ten sessions later. Four of the five losses were under 1%. while the average gain was over five times as large at 4.7%…

Previous Day: SPX -1% intraday, closes +1% from low
Today: SPX closes below previous day’s low,
Up YTD and/or above 200-day avg
05/12/21… SPX +3.3% two weeks later
09/08/20… SPX -0.5% two weeks later
05/13/19… SPX -0.3% two weeks later
05/07/19… SPX -0.7% two weeks later
12/10/14… SPX +2.8% two weeks later
03/16/11… SPX +5.7% two weeks later
11/23/10… SPX +4.0% two weeks later
10/01/09… SPX +6.5% two weeks later
12/14/07… SPX +0.0% two weeks later
07/27/07… SPX -0.4% two weeks later
08/05/03… SPX +3.8% two weeks later
01/28/00… SPX +2.0% two weeks later
01/04/00… SPX +4.0% two weeks later
10/15/99… SPX +9.3% two weeks later
12/14/98… SPX +8.8% two weeks later
12/03/98… SPX +2.6% two weeks later
10/07/98… SPX +10.2% two weeks later
06/15/98… SPX +5.7% two weeks later
08/28/97… SPX +2.2% two weeks later
12/12/96… SPX +3.8% two weeks later
02/26/96… SPX -1.6% two weeks later

The bad news from a short-term perspective is that TLT is also down 1%+ Tuesday. When SPX and TLT both fall 1%+ for the first time in weeks, it’s usually not a bullish sign for stocks over the following week. Since inception of TLT, there have been 23 instances when SPX and TLT both fell 1% for the first time in at least three weeks. The S&P was nearly twice as likely to trade lower over the next five sessions (up 8, down 15). Average gain 1.6%, average loss 2.4%…

SPX & TLT -1% (1st time in 3wks)
09/28/21… SPX -0.2% one week later
05/10/21… SPX -0.6% one week later
02/25/21… SPX -1.6% one week later
03/11/20… SPX -12.5% one week later
09/09/16… SPX +0.5% one week later
12/03/15… SPX +0.1% one week later
08/25/15… SPX +2.5% one week later
03/06/15… SPX -0.9% one week later
08/15/13… SPX -0.3% one week later
06/19/13… SPX -1.6% one week later
05/07/10… SPX +2.2% one week later
10/26/09… SPX -2.3% one week later
05/07/09… SPX -1.6% one week later
01/22/09… SPX +2.1% one week later
10/08/08… SPX -7.8% one week later
07/11/08… SPX +1.7% one week later
02/04/08… SPX -3.0% one week later
06/07/07… SPX +2.2% one week later
03/09/05… SPX -1.6% one week later
01/04/05… SPX -0.4% one week later
05/07/04… SPX -0.3% one week later
04/13/04… SPX -1.0% one week later
07/21/03… SPX +1.8% one week later

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