2/4 Unfilled Large Gap with High Volume making 20-day Low

Whew....what a day. ES was already down six point before the Jobs number was released and the worse than expect job number caused ES to trended down pretty much all day long.

Looking at daily SPY historical data from 2002, there are 27 instances that gap down more than 0.7% and not filled on the same day. The next day has an average of -0.04%. However, the average is rather deceiving, 7 out of the next day close higher for more than 1% and 4 out 27 closed down more than -1%. Out of the 4 instances, 10/6/2008 closed down more than -6% and 11/19/2008 closed down more than -5%. The chance of the next day develops into a trend day is definitely higher than normal, and I would be very cautious the next day.

Interestingly, this kind of behavior seems happen more frequent in sever market drop more than anything other period. 12 out of 27 instances took place after June 2008.

2/3/2010 Consolidation After Two Higher Closes

The most salient feature of today's market is that SPY consolidated after two days of higher closes. I did a search on the historical data of SPY since 2000 to see the historical tendency of the day after. By using the rules of 2 higher highs, followed by a small negative drop, and above SMA200, I found 18 instances. 60% closed higher from the open of the next day and with an average of 0.11%. There is no obvious edge on either side, but I will align myself with the long side and will be looking for entering long position at favorable location.

With the market trading 6 point below yesterday's cash close forming a potential gap at 6:32 AM, I looked into the historical data and found that when market gaps down, the historically tendency does even better, an average of 0.23% vs 0.3% when market opens above yesterday.