Impressive reversal

There's no doubt that Friday's reversal (so far) looks impressive. On a chart, there is no more classic sign of selling exhaustion than a big intraday about-face after days of pressure.

The problem is that charts are ripe for cherry-picking and self-delusion. Let's go back as far as we have intraday day for, 1989, and look for every time the Nasdaq Composite suffered at least 4 days of intraday declines of more than 1%, fell to at least a 50-day low, and on the last day lost at least 2% intraday before reversing to close in positive territory.

If we relax the parameters and instead of that last day suffering a 2% or more intraday loss, just require a 1% loss, then we nearly triple the sample size. The suggestion doesn't change much, though. This kind of reversal has not been a consistent predictor of a sustained end to selling pressure. In the last decade, it has been more consistent, so bulls have to hope we're in the same kind of environment.