Follow-through After a Gap Down

Historically, a one-way move lower immediately following a downside gap generally leads to a bit more follow-through over the next 1-3 sessions. In the table below is every instance since 1990 in which S&P futures closed down in excess of 0.5% and posted a lower high and lower low immediately following an unfilled downside gap (defined as high < previous day’s low)…

S&P Futures -0.5%, Lower High & Low after Unfilled Downside Gap
07/11/11… ???
02/23/11… Lower S&P close one session later
08/12/10… Lower S&P close one session later
06/30/10… Lower S&P close one session later
06/07/10… No lower S&P close within three sessions
05/05/10… Lower S&P close one session later
06/16/09… Lower S&P close one session later
03/03/09… Lower S&P close two sessions later
02/18/09… Lower S&P close one session later
10/07/08… Lower S&P close one session later
05/21/08… Lower S&P close two sessions later
02/06/08… No lower S&P close within three sessions
01/16/08… Lower S&P close one session later
01/21/05… Lower S&P close one session later
09/23/04… Lower S&P close two sessions later
04/29/04… Lower S&P close one session later
01/21/03… Lower S&P close one session later
09/24/02… Lower S&P close four sessions later
07/22/02… Lower S&P close one session later
03/12/01… Lower S&P close two sessions later
02/20/01… Lower S&P close one session later
07/19/00… Lower S&P close two sessions later
05/22/00… Lower S&P close one session later
06/24/99… Lower S&P close one session later
05/06/98… Lower S&P close one session later
08/30/96… Lower S&P close three sessions later
07/08/96… Lower S&P close three sessions later
09/12/94… No lower S&P close within three sessions
06/21/94… Lower S&P close two sessions later
05/09/94… Lower S&P close two sessions later
03/25/94… Lower S&P close two sessions later
07/06/93… No lower S&P close within three sessions
04/22/91… Lower S&P close one session later
10/29/90… No lower S&P close within three sessions
10/10/90… Lower S&P close one session later
08/22/90… Lower S&P close one session later
08/17/90… Lower S&P close two sessions later
01/15/90… Lower S&P close two sessions later

In 24 out of the last 26 occurrences, and in 32 out of 37 (86%) since 1990, S&P futures posted a subsequently lower close within the next three sessions. That’s significantly greater than the 65% random chance for a close below today’s settlement within the next three days.

I should add that we’ve recently seen some very unusual price action involving gaps. Other studies that were triggered today are listed below. Both involve gaps and both have suffered recently. 1% down days following an unfilled downside gap had previously led to further downside over the short-term, but each of the last two occurrences failed to see follow-through. Along similar lines, two consecutive unfilled downside gaps has previously led to a one-day oversold bounce, but only two of the last six occurrences led to gains and both were less than 0.5%.

S&P Futures -1% following Unfilled Downside Gap
07/11/11… ???
06/24/11… No lower S&P close within four sessions
06/07/10… No lower S&P close within four sessions
09/01/09… Lower S&P close one session later
06/16/09… Lower S&P close one session later
03/03/09… Lower S&P close two sessions later
10/07/08… Lower S&P close one session later
05/21/08… Lower S&P close two sessions later
11/18/03… Lower S&P close two sessions later
01/21/03… Lower S&P close one session later
09/24/02… Lower S&P close four sessions later
07/22/02… Lower S&P close one session later
03/12/01… Lower S&P close two sessions later
02/20/01… Lower S&P close one session later
09/15/99… Lower S&P close four sessions later
07/30/99… Lower S&P close two sessions later
05/06/98… Lower S&P close one session later
10/24/97… Lower S&P close one session later
12/12/96… Lower S&P close two sessions later
05/09/94… Lower S&P close two sessions later
03/25/94… Lower S&P close two sessions later
10/10/90… Lower S&P close one session later
08/22/90… Lower S&P close one session later

S&P Futures Do Not Trade >Previous Day’s Settlement Two Consecutive Sessions
07/11/11… S&P futures ???
05/23/11… S&P futures -0.1% next session
03/15/11… S&P futures -1.7% next session
11/12/10… S&P futures +0.0% next session
08/12/10… S&P futures -0.3% next session
08/11/10… S&P futures -0.5% next session
08/06/10… S&P futures +0.5% next session
11/20/09… S&P futures +1.3% next session
10/02/09… S&P futures +1.4% next session
08/17/09… S&P futures +1.2% next session
07/29/09… S&P futures +0.8% next session
04/07/09… S&P futures +1.1% next session
03/30/09… S&P futures +1.3% next session
03/02/09… S&P futures -2.3% next session
11/12/08… S&P futures +6.4% next session
11/06/08… S&P futures +3.5% next session
10/22/08… S&P futures +1.4% next session
02/29/08… S&P futures +0.1% next session
02/05/08… S&P futures -1.0% next session
12/17/07… S&P futures +0.7% next session
12/04/07… S&P futures +1.6% next session
10/19/07… S&P futures +0.5% next session
10/16/07… S&P futures +0.3% next session
08/28/07… S&P futures +1.9% next session
06/06/07… S&P futures -1.8% next session
03/28/07… S&P futures +0.1% next session
11/27/06… S&P futures +0.4% next session
09/07/06… S&P futures +0.2% next session
08/01/06… S&P futures +0.6% next session
07/13/06… S&P futures -0.4% next session
01/18/06… S&P futures +0.4% next session

Categories : Archived Intraday Commentary, Intraday Commentary

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