So that was an ugly one. The S&P had its first 2% down day since June, and it went a lot further than 2%.
I spent today testing what happens the night after hard down days in an uptrend.
Most of the time SPY opens higher the next morning. About 7 times in 10, 90 nights since 1993.
The bounce shows up overnight. The session after has added close to nothing.
There's a catch. The drop can be too big. Only two days in that whole stretch were as big as today, and SPY opened lower the next morning both times.
So I'm sitting tonight out. The next time we get a hard down day that fits, I'll post the trade before the close.
Reply and tell me if you want these when they come up.
Below the line for members: the exact zone I tested, how the results change with the size of the drop, and the two days that were too big.