Key Points:
There are three main categories that encompass 27 prior instances when the S&P 500 has fallen to 9% or more from highs and closed below its 200-DMA since 1970.
Overall Takeaways
Forward gains post-follow-through day in bulls are substantially better. If the market struggles for the forward four/eight/thirteen weeks post-follow-through day, this has typically been a bad sign.
One follow-through day failure is fine, in fact, outcomes are even better (table #2). But, when two follow-through day failures have occurred (undercut of lows before new highs), each time this had led to a bear market.
Bears have had an average of six failed follow-through days before lows.
