Reversal Tendencies For 2% Gaps Lower

Last week I showed how gaps up of 2% or more tend to reverse over the next few days. Today I’ll show gaps down of 2% or more. In the table below I show all instances where the SPY opened 2% or more below the previous day’s close. The column on the right shows how long it took for the SPY to close at a price above the opening gap price. Including Wednesday’s failure, the SPY has closed above the 2% gap down open about 69% of the time. There has only been one instance where it didn’t close above the gap open at some point in the next 3 days.

Also, here’s an interesting tidbit from last night’s Subscriber LetterHow incredible has the market action been of late? Since 1960 the S&P has had 14 days where the market sold off 5% or more. The 1987 crash accounted for 3 of them. The 2000-2002 bear market only had 1 – on 4/14/2000. In the last month the S&P 500 has seen 5 days with losses of 5% or more.