A Quick Excel Study

I'm on vacation, so I'll make this quick. For some odd reason I decided to run a quick test in excel looking at gap ups and downs in excess of 1 percent going back to SPY's inception (1993). These numbers aren't adjusted for dividends or splits because I wasn't able to attain an adjusted "open" so I had to keep things consistent (i.e., unadjusted). If you'd like to see the excel test I did in its entirety, just email me and let me know.

Going back to January 29, 1993 to yesterday (August 18, 2014), on an unadjusted basis, there have been 224 gap ups of at least 1 percent and 235 gap downs of at least 1%. Out of the 5,427 total trading days in the look-back period, this represents 4.13% and 4.33% of total trading days consisting of gap ups/downs of at least 1% on an unadjusted basis, respectively.

More interestingly, I decided to look at the percentage of time that SPY closed higher than where it opened on gap up days (at least 1%) and closed lower than where it opened on gap down days (at least 1%). When SPY gaped up at least 1%, it closed higher than where it opened 58.04% of the time. This compares to a 51.59% total (closing above where it opened). On the opposite end, when SPY gaped down at least 1%, it closed lower than where it opened 48.94% of the time, compared to a 47.13% total.

As you can see below, even when SPY gaps down at least 1%, the intraday performance (i.e., where it closes in relation to where it opens) has been positive, both on an average and median basis (0.09% and 0.06%, respectively). While the performance numbers themselves may not seem too impressive in magnitude, the fact that SPY has averaged out a positive median intraday positive performance going back to 1993 seems to suggest, on aggregate, buying strength (specifically, gap ups in excess of 1%) has been better than shorting gap downs in excess of 1%.

While this clearly isn't meant to serve as a trading strategy, I think it provides some insight into the historical performance of the market (specifically, SPY ETF). In addition, this rather truncated analysis doesn't provide any insight into the market structure (bear/bull market); this is another big component that needs to be considered as well.

Interesting nonetheless (at least for me, hopefully for you as well)!

			%
	Gap Ups	224	4.13%
	Gap Downs	235	4.33%
	Total Days	5427
Pos Close	130
Neg Close	115
Gap Up, % Pos Close	58.04%
Gap Down, %, Neg Close	48.94%
Up, Avg Perf	0.22%
Up, Median Perf	0.29%
Down, Avg Perf	0.09%
Down, Median Perf	0.06%
		%
Total Close>Open	2800	51.59%
Total Close<Open	2558	47.13%