Fading the Open

The overnight markets are all lathered up and maybe offside on the Greece bailout news (haven’t we seen this picture before?)  so we thought we’d take a quick look at gap up opens in the SPY (S&P500) ETF.   Since the SPY began trading in January 1993 it has opened up 54.8% of the days with a mean higher open of 0.41 percent and median of 0.28 percent.  On the same day it has filled the gap higher 68.9 percent of time.

Unfilled opening gaps are rare and markets will usually attempt to fill them.  The S&P 500 just recently filled its April 19-20th gap open at around 1312, which now looks like short-term support.   In the table below,  we’ve broken down higher opens by time periods:  1) lifetime of the SPY;  2)  Beginning of financial crisis to Friday’s close;  3) the March ’09 bottom to Friday’s close; and 4) the current year.

What stands out is that in all periods the opening gap higher is at least 50 percent filled on the same day in 80 percent of the higher opens.   Fading up and buying down opens are a favorite of the trading set and you can see here that on higher opens they have the probabilities on their side.    We will have more in depth analysis on this in future posts.  Stay tuned!   (click here if table is not observable)

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2 Responses to Fading the Open

  1. Pingback: Fading the Open? | The Big Picture

  2. Pingback: Tuesday links: vanishing real yields | Abnormal Returns

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