The SP has had two consecutive extreme readings in the 2-period ROC. This can set up the big day pattern. (The Big Day pattern does not work 100% of the time, but it’s something to keep an eye on.)
The following came from a small class given by Linda in 2002:
Day 1 and 2 are the extreme readings, then day 3 is the countertrend reaction. A very aggressive trader can go long on the close of day 2...looking to exit Day 3.
But, you can also go short on the close of day 3...for the great majority of the time you will gap down and not see the highs of day 3 on day 4. Shorts would be exited on Day 5…usually do not get much downside follow through after Day 5.
SRS
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