As Lowry Research has noted, “…our 69-year record shows
that declines containing two or more 90% Downside Days usually persist, on a
trend basis, until investors eventually come rushing back in to snap up what
they perceive to be the bargains of the decade and, in the process, produce a
90% Upside Day.” - Lowry Research.
So, does this mean the correction is over? Not likely.
90% bullish up-volume reversals aren’t always a great
signal during extreme events. Let’s look back to the Financial crash of 2008. (The
following chart is a weekly chart so some of the discussion won’t follow the
chart exactly.)
As the crash suffered a waterfall drop (similar to what
we have seen recently) between September and November of 2008, there were six
90% down-volume days between 15 September and 10 October. (We’ve
seen five 90% down-volume days in the last 3-weeks that met all of the 90% down-volume requirements.)
The low on 10 October was 899. The S&P 500 jumped 12%
the next day with 95% up-volume – just like Friday. In this case, the Lowry Research
statement that implies the correction is over did not prove true. 2 days later,
there was a 90% down-volume day that gave up the entire 12% gain.
A failed bounce followed leading to a final bottom in March of 2009.
From the first bounce low in November to the final low in
March, the Index lost another 32%.
As for now, I'm going to look for more confirmation.
I admit, this is a crisis like no other, but it shares one
thing with the Dot.com and financial Crashes. There’s no visibility about where
earnings are going to end up. On a more
positive note, this one could be shorter than other crises.
We’ll be looking for a bottom.
