Probability of Downside Gaps Getting Filled

Here is some statistics on how long it takes for downside gaps of > 0.75% on SPY to get filled:


Total # of occurrences = 100 (excluding Monday), average % change on the day is -2.37%.

As one can expect, responsive buyers comes in on the first subsequent day, giving it the highest probability of closing such gaps. The average closing price on that day is 99% of the pre-gap closing price, in other words, the performance today was slightly average (Friday close of $100.79 x 99% = $99.78) since SPY closed at $99.28. For the instances where the gap did not close on the first day, the average performance on the second day is negative, with the close price averaging 98.6% of the pre-gap price. Similarly, on the 3rd and 4th days, the readings are respectively 97.9% and 97.6%. Therefore, history suggests that each day that passes where we do not reclaim Friday's closing level, the odds of a search for new lows increases.