Big single-day rallies are far from uncommon during downtrends, corrections, and bear markets. And many are quick to point out that we shouldn’t make too much of Friday’s big reversal from a weak open to a ferociously bullish close. In fact, Quantifiable Edges expertly demonstrates that a lot of money could have been made during the last couple of decades by going short at the close on days like last Friday:
This strong tendency for the market to fade quickly after large one days rallies during larger downtrends adds extra importance to today’s close. Thus far we are seeing nothing but follow-through strength and the S&P is close to testing the upper edge of its recent range:
E-mini S&P Futures (Daily)
Persistent strength into the close would put bears on notice that Friday wasn’t a garden variety bear market rally and could stimulate additional short covering over the coming days.