Today's market, as measured by SPY, dropped about 1.9% on a range that was over 2.3 times its average daily range from the past twenty sessions.
Since March, 1996 (N = 2553 trading days), when SPY has dropped 1.5% or more in a single day with a daily range of twice or more its 20-day average, the next day in SPY has averaged a gain of .55% (30 up, 19 down). When SPY has dropped 1.5% or more in a day with a range of less than twice its average, the next day in SPY has averaged a gain of .15% (99 up, 81 down). It thus appears that a single day drop on a large range tends to bounce the following day.
Finally, combining this analysis with my last one, I found 24 occasions in which we had a one-day drop of over 1.5%, a five-day decline of over 3%, *and* a one-day relative range greater than twice its twenty-day average. Two days later, SPY was up by an average 1.02% (17 up, 7 down)--much stronger than the average two-day gain of .07% (1360 up, 1193 down) for the sample overall.
In all, it appears that we tend to get a bounce following a large decline during a weak week when the daily range is extended.
I will post details of the market drop later tonight in the Trading Psychology Weblog.