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3 days of unclosed gaps in the ES


Does anybody know if the ES has seen 3 days of unclosed gaps in the past like we saw on Wednesday, Thursday, Friday last week?

13, 14, and 15 June 2007 all had unclosed gaps.

Yes, I think I see the problem -- it is a visual artifact of TradeStation's continuous contract. An excellent reminder to be careful about what one takes on face value from one's continuous contract chart (or any chart, for that matter)....
As if trading isn't difficult enough by itself!


Well, well....a nice little gap shaping up in this morning's pre-market. Shall we go for four-in-a-row?
Here is some more information about this pattern.

This is from Longtermer and was posted in the subscriber section of Khalsa's Pad and reproduced here with permission.
quote:
In answer to your post about 3 unfilled up gaps friday K, I have the data on the cash market going back to 1950 and there are 27 instances (one every 2 years roughly.)

broadly speaking ( 70% + ) they point to a breakaway market in acceleration with further upside.

In fact of the first 17 ( upto 1989) over 60 % didn't fill any of the gaps before a multi % upmove.

Of the last 10 upto 28/12/01, 70 % filled the third gap with less than 1 % upside normally within 1-3 days, 2 filled the third gap with only slightly over 1 % upside and only one was a breakaway leaving all three gaps unfilled.

2 of these 10 instances also marked a high that gave an almost immediate moves towards an eventual 5% plus downside.

Therefore swings taken here have a good record of the past 18 years (70%) of getting back to 1522 cash with a max drawdown of 10 handles and a 90 % record if you can bear 20-25 handles.


The following was also posted on Khalsa's Pad but no source was quoted so not sure where it originates from.
quote:
An unfilled upside gap can indicate a market in the midst of a runaway move to the upside. In such cases, the close is invariably greater than the open, creating a 'white' candle in candlestick charting. This has been the case with virtually all recent gaps - of the last fourteen unfilled upside gaps in S&P futures, every one related to a white candle. But for the first time in nearly two years, S&P futures posted an unfilled upside gap on Friday that coincided with a black candle, meaning the close was below the open. This reflects a change in character, as the market lost upside momentum soon after the opening and drifted sideways into the close, unlike the last fourteen upside gaps. Since 1990, there have been a total of eighteen instances of similar upside gaps in the front-month S&P futures contract that coincided with a black candlestick. In only one case was the gap not filled at some point over the next six sessions, suggesting we'll most likely see that gap filled (at SPU 1541.80) sometime this coming week...
I see that gap poster. 4 in a row? I think that the odds are against us, but that doesn't make it impossible. Even IF there was a 99% of a gap fill today there would still be that 1% chance that it doesn't fill. It's almost impossible to work out the odds on something like this because it's such a rare occurrence.
Well Friday's settlement price is 1547.75 (last traded price is 1547.50) and the market is trading between 1451.25 and 1452.25 at 9:05am so we're looking at a around a +3.5 to +4.5 gap opening if we remain at these prices. So the question I am asking myself is: What are the odds of closing that gap or getting stopped out at the same size? I don't have any stats on this so I have to go with my gut here. I am thinking that we can see the gap expand to up to 6 or 7 points before we see an attempt at a gap close so my temptation would be to hold off the entry and try for a better price and use a smaller stop.
Fascinating stuff. What would also be interesting is to see the impact of Opex (not to mention witching) weeks on unfilled gaps -- although I imagine the data sample would be so small as to be only anecdotally, not statistically, significant.

In any event, as McMillan has noted, post-Opex trends tend to be countertrend (about 60% of the time, as I recall) to a prevailing strong trend (if there was one) in the previous week. This past opex week we saw a strong uptrend, which would augur a retracement. Add to this the fact of the aforementioned gaps and....

The only thing, of course, is that it's a bit too cute, don't you think?
I agree with the potential for post-gap expansion...although it's a gut thing...

Interesting, though, to see the bond market start to settle after it's smart rise off the open this morning. The 30 year is sitting at 106 15/32, right at what I have marked as R1 (106.47)
Here we go.

The triumph of statistics over "the gut"...
well with the dow cash up 20 points I'm going short for the gap fill...perhaps they take may money today on this...let the odds fall where they may


BruceM, could you elaborate a bit on how you used the cash market with Monday morning's trade? Thnx...