If a market moves from Point A to Point B in a smooth, steady fashion, does that lead to different short-term outcomes than if the move is choppy? For instance, over the last two weeks (10 trading days), we've risen almost 3.5% in the S&P 500 Index ($SPX). The move has been relatively choppy, however, with five of the days rising and five declining.
I went back to February, 1996 (N = 2618 trading days) and found 565 periods in which SPX had risen between 2%-5% in a ten-day period. When the move was smooth--seven or more of the days rising (N = 248)--the next ten days were up on average by .44% (154 up, 94 down). When the move was not smooth--six or fewer of the days rising (N = 317)--the next ten days were up on average only .08% (166 up, 151 down).
It thus appears that rises interspersed with selling have poorer near-term outcomes than rises that are smooth and consistent. The market's recent 10-day rise, by this gauge, is not necessarily a stimulus for superior returns going forward. This smoothness/choppiness is a variable that could be studied across many time frames--intraday as well as daily--for any trading instrument. I will be following this up with further investigations.