Today marks the sixth day in the row that the S&P 500’s RSI(2) value was under 25. Since Jan 1 2000, this has happened only 15 times prior to today. So I thought it would be fun to see what the forward return has been after these events. Here’s a handy spreadsheet. I calculated the forward return from the following day’s open to the close of either the 5th or 20th day. I.e. if you were trading based on today’s performance, you’d buy next Monday at open, and exit on Friday’s close (for the 5 day version). I haven’t included those pesky commissions in these numbers.
Should you buy on Monday? Is 15 data points enough? Is there an Easter Bunny? I can only answer two of those questions.
Update 02/08/16: looks like this was one of those “other” times. As of this writing, the S&P 500 is down over 3% from when this article was written. Ah well.