A New Analog: Jul 23, 2021

It’s not unusual to see a very deep, extended backtest prior to a selloff. In the old days, we would attribute this to malevolent market makers who wanted to flush out weak shorts before cashing in. The same thing happens these days, though it is typically perpetrated by algorithms and HFTs. As we discussed yesterday, we have an example of just such a maneuver in the recent past which serves as a good guide as to what to expect over the next 3 weeks. Like all analogs, it has the potential to pay off nicely for traders.