This is a special edition as I saw people talking about 80% chances the Friday’s gap would be filled. So I did my own research again. Frankly, initially I was disdainful of the idea of counting the gap fill as since the year 2009 bull market we had way too many unfilled gaps so I’ve long given up betting on filling the gap.
The first chart below shows about 90% chances since the year 2009 bull market that SPY high to low gap would be filled. Sounds good, but the problem is sometimes it takes a year to fill the gap therefore the idea is not tradable. We’ll need know on average how long it takes to fill a gap and what the max draw down would be. The chart is very large, you may need click twice to see the original size.
To write a program to get the average times needed to fill the gap is a little bit complicated, so the chart below simplified the research. Only counts today’s low is 0.6%+ higher than the yesterday’s high kind of gap like what happened on Friday (05/08), also if the gap took months to fill, then count it as unfilled because in reality trading, you’d long given up. The results, well, 75% chances the 05/08 gap would be filled within short period of time, see chart below for more details. The chart is very large, you may need click twice to see the original size.
Hope the above research helps.