Large Gaps Up After Very Large Down Days

In my last post I looked at how SPY has performed from open to close when a 2% gain was followed by a gap up of at least 1%.  Today we are seeing another 1% gap up, but this time it is on the heels of a 2% loss.  So I thought it would be interesting to examine this scenario.  Results of the last test suggested the open to close action favored a move lower, which is what played out on Tuesday.  Below is the general stats for setups like today.

Not a ton of instances.  At this point we can see what appears to be a moderate upside edge.  Let’s take a look at the list of instances to see if we can learn anything more.

Most striking to me here is that there was not a single instance that closed within 1.5% of its open.  Volatility after the bell was huge.  Traders looking for intraday moves should have plenty of action today.