What Happens After Three Straight Down Days?

We've had three consecutive down days, losing about 2.4% in SPY over that time. Going back to October, 1998 (N = 1923 trading days), there have been 174 occasions in which we've had three down days. The next day, SPY has been up by an average of .31% (113 up, 61 down), much stronger than the average one-day gain of .02% (1003 up, 920 down) for the entire sample.

This positive bias has been present during the recent bull market. Since March, 2003, we've had 54 occasions of three consecutive down days. The next day SPY has been up by an average of .25% (39 up, 15 down). What this means is that, after three straight down days, we've been about twice as likely to have an up day as a down day. Indeed, we've had an up day follow three straight down days 8 of the last 10 occurrences, going back to October, 2005.