Will the Stock Market Reverse Again?

Stock indexes opened 2016 with a steep decline. They reached a bottom on February 11 and rapidly retraced much of their start-of-the-year losses. What’s next. This statistics blog argues that another rapid decline is likely the next move. Take a look at his data and arguments, and see if you agree.

In the 25 trading days since February 11 (when the S&P closed at 1829), the market surged at an average daily gain of 0.5%.  The S&P fell <-0.5% in just 3 of those 25 days, netting -3% total among those days.  While the S&P rose >0.5% in 10 of those 25 days, netting a whopping 13% total.  The remaining 12 trading days contributed just 0.1% daily to the post-February 11 surge.  And it’s reasonable to state that the market was due for a bounce-back of this nature, after the damage caused earlier in 2016.  The question of course remains: where do we go from here?  Our probability analysis of market patterns forecasts that we are essentially near the top, and the longer we lurch forward at this point, the more grisly an ensuing crash with the most proximate random news blamed as the “cause”.