Monday, August 22, 2011

Big Gaps Up After 2 Strong Days of Selling

After 2 hard days of selling the SPY looks to be gapping up strong this morning.  I looked back at other times that the SPY gapped up big after 2 large down days.  Below are the results since 2003 of buying all instances at the open and then selling at the close.

There appears to be a bit of an inclination to follow through on the gap to the upside.  Most of the instances were quite volatile, and all of them pulled back at least 0.4% below the open at some point during the day.  Most of them also took place during 2008 when volatility (both intraday and overnight) was elevated.

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