0.5% Gap Downs 3 Days In a Row

There have been 3 days in a row of 0.5% or greater gap downs in SPY as of today.  Action after the open has been relatively tame with no big down days.

Without factoring in any other data, just looking at the 3 gap downs in a row, there were 26 instances in the history of SPY (back to late 1995).

19 closed above the open on the day, with an expected value (including losses) of a little over 1%.

Also, 20 out of the 26 filled the gap down of the most recent day (today in this case) within the next 2 trading sessions (by Wednesday in this case).


The flip side of this is that, there are some signs that suggest a pullback is probable.  So I am looking to make an inverse trade on the index ETFs.  But the data above suggest we may anticipate a fill of today's gap before considering an inverse position.

I am monitoring the 30 min and 60 min SPY charts with a 3.0 volatility stop as an entry signal for a short/inverse trade.

The above data also basically fit with what I am seeing from time cycle analysis.  Short term the cycles are up until Tuesday/Wednesday, than are turning lower into next week.


Pete