S&P 500 Returns Following New Lows (and Highs)

Today the S&P 500 closed at a 20-day low. Is there anything useful we can do with this piece of information? Let’s take a look at the performance of SPY after it closes at a 20-day low:

spy performance after 20 day low

 

Not particularly useful I’m afraid, just random variations around the average. What about other look-back lengths?

spy performance after x day low

 

Now this is more interesting. 60-day lows and up appear to have a bit of an edge, both for the day immediately after the low, as well as the medium term afterwards.

Let’s take a closer look at the returns after a 200-day low, with 95% confidence interval bands around them. Naturally, returns tend to be highly volatile around 200-day lows, which (combined with the small number of observations) means a very wide confidence interval.

spy performance after 200 day low

 

The 200-day low effect also seems to be prevalent in most equity indices, but without the regularity and strength that has been displayed by the S&P 500. Finally, what about new highs?

spy performance after x day high

Nothing to see here, move along! Slight underperformance compared to the average, but nowhere near enough to even consider shorting.