Gap Fade Statistics for May

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