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Big SPX Moves

By Lawrence G. McMillan

Last fall, we published several studies in The Option Strategist Newsletter and summarized them here, as well as enacted several trades based on “big moves.” At the time, 20 of the 21 largest $SPX daily rallies had been reversed in a fairly short period of time afterwards (3 to 23 trading days). The only one that had not been reversed was the one coming out of the March 2009 bottom of the financial crisis. Then there were two – on December 26th, 2018, and January 4th, 2019 – that weren’t reversed either. The reason that these are usually reversed is that occur during volatile, bearish markets where rallies are fierce but short-lived. However, at the actual bottom (March 2009, December 2018) the rallies were real – not just oversold bounces.

The reason I bring this up is that yesterday’s $SPX rise of is the 12th largest move of all time. Will it be reversed? The $SPX chart is still bearish, and the market was oversold by many measures, so this may be reversed. I believe it is at least worth a speculative trade...

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