Tuesday, March 24, 2009

Is There Still A Tendency For 2% Gaps Up To Pull Back In The Next Few Days?

Below is a table that first appeared on the blog last fall. It shows how long it took for the SPY to close below the open of an extra large (2%) gap higher.
(click to enalrge)

What was once a very strong tendency now appears to have lost much of its edge as four of the last nine 2% Up Gaps have failed to post a close below the gap open within the next week. What’s interesting about the "failures" is that they all occurred either 1 or 2 days after the market had closed at a 200-day low. In fact, the only one that was 2 days after was Monday 11/24/08, which was the day after the 11/21/08 occurrence that also didn’t pull back. Monday the market was far removed from its 200 day low. Of course SPY would need quite a pullback if it were to close below Monday’s open anytime in the next few days.


Anonymous said...

The website Bespoke.com posted an analysis yesterday. They stated that the rise in the Dow on Monday was the 23rd largest in history, percentagewise. They posted what happened the following day, on all those prior instances of big rises-- average, and median, results as well.

Their glimpse dovetails with this posting of yours, in terms of whether to fade yesterday's sharp rise over the next few days, or hop on it...


Leavitt said...

Daniel - do you have a link to the bespoke.com analysis?

The Jaded Apprentice said...

I think this was the posting being referred to (Bespoke Investment Group):


Anonymous said...

Thanks Jaded.