Nevertheless, this is a bearish sign for next Monday but a short-medium term bullish signal for the stock market. Here's what happens next when the stock market falls more than 2% on Thursday and on Friday.
Here are the historical cases.
March 23, 2018 (current case)
August 21, 2015
January 30, 2009
July 19, 2007
October 16, 1987
September 13, 1974
Let's look at these cases in detail.
August 21, 2015
January 30, 2009
This case doesn't apply to today because we are not in a bear market or a recession.
July 19, 2007
October 16, 1987
September 13, 1974
This historical case doesn't apply to today. It happened within the context of a bear market and recession. We are neither in a bear market nor recession today.
Conclusion
When the stock market crashes more than 2% on Thursday and Friday:
It makes AT LEAST a marginal intraday new low on Monday. This makes sense. When the market crashes, some of that residual fear carries over the weekend and creeps in on Monday. That causes the market to fall from the OPEN on Monday.
The stock market is higher next Friday vs this Friday in 4 out of 5 historical cases. This wasn't true of October 16, 1987: it crashed the following Monday. But the Medium-Long Term Model predicted that “significant correction”, whereas it has yielded no such SELL signal this time.
The stock market was very close to a medium term bottom AS LONG AS there wasn't a bear market and recession. The bear market cases are irrelevant today: there is no recession today. And most of those bear market cases happened near the bottom of the bear market, after the market had fallen 50%+.
