3 Days of Unfilled Gaps in the ES

3 Day Unclosed Gap Study

This article was written on 17 June 2007, a Sunday. During the previous week, the E-mini S&P 500 (the ES) had 3 back-to-back unclosed gap days on Wednesday, Thursday, and Friday, (13 June 2007 to 15 June 2007 inclusive).

The questions that everyone wants answered are:

• Has this happened before?
• If so, what did the market do on the fourth day?

To answer these questions I pulled RTH (Regular Trading Hours) data out of my data base of prices since the ES start trading which dates back to 2 April 1998. The closing price that I used for each day was the last traded price and not the settlement price. RTH is from 9:30am to 4:15pm ET.

My first look through the data showed me that we have had 40 runs where there have been 3 unfilled gaps in a row and 9 times there have been 4 unfilled gaps in a row. When I started looking at the data I realized that many of the patterns were not like the recent one that we had just seen which was a continuously up pattern of a micro-bull phase. Many of these gaps included both up and down gaps in the 3 or 4 unfilled gap run.

Only unfilled gaps in an up pattern

Because I am only interested in finding out what might happen on the fourth day in this particular pattern (the up/bull pattern) I filtered out all unfilled gap patterns except those where the gaps were above the previous session’s close. This reduced the number of 3 unfilled gap runs to 5, including the run from last week. There were no up-runs of 4 or more.

Here are the dates of the third day:

• 29-Oct-1999
• 5-Nov-1999
• 27-Nov-2000 (includes a Thanksgiving Day)
• 1-Nov-2005 (includes a Fed Day)
• 15-June-2007

I’ve created 4 charts to show you the ranges above including a couple of days before and after where appropriate.

29-Oct-1999 & 5-Nov-1999

This chart covers both of these runs as they were so close together. In my opinion, the 3 day unclosed gap run that most closely matches the current (15-June-2007) gap run is the first pattern on this chart. The second pattern, although the gaps are all up-gaps, the days had their closes below their opens.

27-Nov-2000 (includes a Thanksgiving Day)

Because this pattern happened with Thanksgiving Day right in the middle of it I do not believe that it is reliable to use this pattern because of the low volume distortion crated by Thanksgiving Day.

1-Nov-2005 (includes a Fed Day)

This pattern is probably the second best match to the current (15-June-2007) gap run but the third candle from the right on this chart is an FOMC Fed Day which needs to be considered.

15-Jun-2007 (most recent pattern)

This is the current 3 unclosed gap run (at the time of writing this).

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