Loading ...A Three Standard deviation day.
Let’s assign some meaning to Fully’s post here. Today we had a 3 standard deviation day. When looking at Bollinger Band charts we typically assign a 2 standard deviation band to it. As a general rule of thumb I have observed that an index will not stay outside of the band for more than 2 days. An individual stock can do just about anything.
Below is the silver price (SLV) and the GDX using 2 standard deviations. You can see markets went on an excursion today well exceeding 2 standard deviations.
Below I assign a 3 standard deviation band to some of the issues. So what does this mean? It means that 3 standard deviation bands contain 99.7% of all the market movement within the bands. WOW! So today was a 0.3% event. It is why I could get the visceral fortitude to back up the truck and start loading.
3- Standard Dev bands:
Here are some of the issues I was buying:
Look at the BB action back in March, they can keep plunging despite being outside the bands. Not to mention the upside BB crash move on the move up keep above them for a long time. That being said, I suspect a gap down in the AM will be reversed instantly. 🙂
If you look at the 2 std Dev GDX chart the price bar never stayed outside the band for more than 2 days despite that massive crash. Below I post a 3 std dev chart of the same. Here we see how price only closed outside the band one day then snapped back:
https://stockcharts.com/h-sc/ui?s=GDX&p=D&st=2020-01-29&en=2020-04-22&id=p59205546644&listNum=43&a=817386131
That bottom spike down bar was a 4 standard deviation day
What would be sweet to see is gold and silver dropping to tag their 100 dmas tomorrow and then reversing to close the day positive.
100% on the same page. That being said, it’s possible we get some follow through tomorrow,to possibly tag the 100 dmas in gold and silver.
Due to the long almost 2 month sideways chop, the Daily Bollinger Bands were very tight on Gold, Silver and GDX, signaling to me that a big move was likely coming. Based on my Time & Price models, I had been telling my subs the move was very likely lower and to be patient as nothing on the charts pointed to an Intermediate Cycle Low (ICL) forming until this week.
Excellent Info all…thanks
Very useful tips on using Bollinger Bands. Thanks. I never thought of using them like this but that 0.3% observation shows they can give some very sharp signals.