Thursday, January 20, 2011

Unfilled Gaps from Highs

Wednesday was the first significant day of selling in a while.  The gap down in the SPY never filled and the market dropped for most of the day.  Below is a study that examines SPY perfromance following other instances of unfilled gaps down from a 50-day high.



These unfilled gaps from high levels often lead to more selling over the next few days.  The edge isn't huge, but it appears worthy of consideration.

3 comments:

Graeme said...

Hi Rob,

How are you determining an "unfilled gap" here?

Obviously you weren't looking for an absolute gap outside of the prior day's range, so I can only gather that you were looking at the open compared with the prior close. But if that's the case what makes it unfilled? My data shows the SPY high @ 129.54 compared with the prior day's close @ 129.52, so the opening gap from the prior day's close would have been filled during the day????

What am I missing here?

Rob Hanna said...

Hi Graeme,

I used Tradestation for the study. They show $129.50 as the high - just below the previous day's close.

Rob

Graeme said...

thanks for the clarification Rob!

Cheers