Tuesday, July 24, 2012

The Edge Suggested By 2 Consecutive Unfilled Down Gaps

One notable aspect of the price action over the last 2 days is that both Friday and Monday posted unfilled gaps down – never reaching breakeven at any point during the day.  Since 1998 occurrences have been followed by a strong propensity to bounce over the next few days.  I broke it down a few different ways in last night's subscriber letter.  But below are the raw results without any additional filtering.

These raw results (whose consistency can be improved by filtering on current market conditions) are still impressive when looking out 1 week.  The pattern of multiple gaps down appears to suggest a short-term bullish edge and is one worth remembering.

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