The Reality Of Large-Range Days
Conventional wisdom states that
large one-day moves immediately continue in the direction of the move. My
research indicates otherwise. Markets that have big one-day moves attract
attention. For example, when the Dow has a large move (100+ points), most news
channels carry the story, most newspapers make it the lead business story, and
every market analyst and guru tells how the move will certainly continue. In
looking at these large one-day moves, the reality is that the majority of time
these markets do not follow through–they move sideways.
–Larry Connors, from Connors
on Advanced Trading Strategies (1998, M. Gordon Publishing Group,
Malibu, Calif.).