Unfilled gaps can be a signal of strength in the direction of the gap.  But when they are quickly reversed by a sign of weakness that can suggest the first move was false.  Friday’s unfilled gap up in SPY was a sign of strength.  Monday’s unfilled gap down was a sign of weakness.  This suggests Friday’s move was false.  Unfilled gaps down that directly follow unfilled gaps up have historically led to further short-term weakness.  This can be seen in the study below.

The edge has primarily play out over the next 3 days.  Of course with AAPL earnings, Wednesday’s Fed Day, and European news flows there are a lot of outside forces that could impact the market over the next few days.  But the action over the last 2 days will likely weigh on the market.

In last night’s Subscriber Letter I showed this study with an additional filter that suggested an even greater downside edge.  If you have never trialed Quantifiable Edges before, go here to sign up for a free 1-week trial.  You’ll be able to see that letter.  If it has been more than 9 months since your last trial and you would like another one, simply send an email to: support @ QuantifiableEdges .com (no spaces) with a request and I’ll set you up.