Gap Fade Statistics for May

Jun 2, 2008: 1:02 PM CST

With the month of May winding down, it’s now time to see how many days resulted in an overnight gap, and how many of those overnight gaps filled, giving us clues as to whether or not the “Gap Fade” strategy continues to work.

Using Excel and daily data for the DIA (Dow Jones ETF), I define an overnight gap as a price differential of at least $0.20 (20 Dow Points) to classify as an overnight gap. I will, however, look at other values for the month.

For the 21 trading days in May, 2008, here are the results:

TOTAL Number of Gaps:              13
TOTAL Number of Gaps Filled:      7
Un-filled Gaps:                             6

% Of Gaps Filled:                54%

Gap-Ups Filled:                            6
Gap-Downs Filled                        1

What happens if we define a gap of $0.50 (50 Dow Points)?

Total Number of Gaps:                4
Total Number of Gaps Filled:      2

% of Gaps Filled:                         50%

The largest monthly gap that WAS filled was +$1.33 on 5/2/08.
The largest monthly gap that WAS NOT filled was -$0.71 on 5/20/08.

Here are the monthly culmulative totals for 2008 from January to the end of May:

Total Number of Gaps ($0.20):       67
Total Number of Filled Gaps:         43

% of Gaps Filled:                           64.18%

If we get a little more conservative with our definition, and define a gap as $0.25 (25 Dow points instead of 20), then the percentage of filled gaps only changes to 64.06%.

See the other monthly posts for more information below:

January Gap Fade Statistics
February Gap Fade Statistics
March Gap Fade Statistics
April Gap Fade Statistics

3 Comments

3 Responses to “Gap Fade Statistics for May”

  1. robin Says:

    Your stats are impressive. I currently trade the 30 year bond futures. Have you ever compiled stats for the bonds? I have not even noticed if there is a frequent gap or not. I will certainly look for it now. Thanks for any help!

  2. Corey Rosenbloom Says:

    Thank you, Robin.

    No, I’m focusing currently on the major Stock Market index ETFs, but will likely move to patterns in individual stocks next, but I’ll likely do some studies on the bonds.

    Is there a specific request you’d like me to study? I could probably test that then.

  3. robin Says:

    Thank you for your response. I was amazed at the stats for filling the gap. I would like to know IF the bond market has frequent opportunities for the gap trade. Some days the bond market opens and screams away from the open without looking back. I know there is a lot of news after the open, but if there is a slight edge to fill a gap it would be nice to get on the train before it leaves. If you can plug in numbers it would be great, if not do you have an excel template? Thanks again.