Another Look at Large Up Gaps (by Leaf_West)

By -

I did a quick analysis of my SPY Gap Data  … specifically I looked at large up gaps (> $1.00) that did not fill.  I just looked at 2010 and 2011.  There were 18 such gaps in 2010 and 3 in 2011 (not including today).

There was actually 2 Gaps in 2010 (during the summer correction period) that filled.  If you look at the stats of the 20 opening gaps in 2010 that opened $1.00 or more above the previous close, 15 closed above the opening price level … in other words, the odds of making money on a SPY purchase at the open was about 75%.  In 2011, we have had 4 total gaps higher of this size and 3 have closed above the opening price for a winning percentage of 75% as well.

 

Gap Data_02

Of interest in the data chart above is that today's price range for the SPY was the smallest by far compared to the rest of the 2010 and 2011 data.  Question is whether or not all of the shorts are already scared out of their positions or if there is another reason for the lackluster performance today.

Of interest is the performance data when looking out 1, 3 or 5 days after the large Gap Day … the next day was red (negative) about 60% of the time compared to about 46% of the time when looking at any random period.

When looking out 5 trading days, the SPY was positive 62% of the time versus 53% of the time when looking at any random period (random % data is per Sentiment Trader).

Anyways, take it for what it's worth …. don't be surprised or disappointed if we have a down day tomorrow.

Cheers … Leaf_West  Visit my blog