US equities have regained the top of their October-December trading range. In the middle of that dramatic move is a much-discussed yet seldom observed market phenomenon: The nearly unblemished V of a waterfall decline and immediate recovery. As traders (those on the long side, at least) heave a sigh of relief, they can draw some useful lessons from the reversal.
The speed and breadth of the recovery provide at least a tentative insight about the preceding drop. December equity markets had unusually high correlation along with below-average dispersion, as Fei Mei Chan showed in an