Mid-week market update: Swing and day traders are often fond of studies that show an edge under certain market conditions. But what happens when two different studies disagree?
On one hand, Rob Hanna at Quantifiable Edges published a study yesterday that signaled a likely bullish outcome for stock prices. Yesterday (Tuesday) would have day 1 of that study.
On the other hand, I had identified a hanging man candle on Friday. While hanging man formations are thought of as bearish reversals, further studies showed that they don't necessarily resolve themselves in a bearish fashion unless there is a bearish follow-through the next day.
When the market opened up strongly on Monday, I had given up on Friday's hanging man, but the market astonishingly closed in the red to flash a bearish confirmation. My own historical study indicates that these episodes tend to be short-term bearish, and bottom out between day 3 and 4, which translates to either this Thursday or Friday.
How can we resolve this apparent contradiction in market studies?