|
Greetings Gappers!
With buyers everywhere, the S&P 500 finished up by almost 10% for the month of April – the largest single monthly gain in 9 years. This extraordinary upward pressure made April undoubtedly one of the oddest months for gap trading that I can remember. However, on the surface, it really wasn’t all that unusual. Below are the “raw” gap fade tallies for the 21 gaps in the four US equity indices (e-mini futures markets):
| Market |
April
Win% | Avg Trade | Long
Win % | Long Avg Trade | Short
Win % | Short Avg Trade | | | Dow 30 | 64% | $46 | 77% | $158 | 50% | -$136 | | Nasdaq 100 | 67% | $7 | 83% | $105 | 44% | -$123 | | Russell 2000 | 64% | $3 | 75% | $189 | 56% | -$245 | | S&P 500 | 67% | $62 | 75% | $152 | 56% | -$59 |
Note: "Win %" assumes each gap was faded at the open of the regular session and exited at prior day closing price with an "end of day" stop. “Avg Trade” equals the average amount of money won or loss (per contract) for all trades.
As the data shows, long gap fades made the money for the month while the short plays were extremely difficult and costly. Though somewhat benign in appearance, what made the month so challenging was the pervasive buying activity that countered historical probabilities on an almost daily basis.
For example, buying “down” gaps during bear markets after short term strength is often a risky setup, while shorting “up” gaps during the same conditions is often a solid play. But not last month. In fact, the feeling I had most days was similar to that of vertigo (special disorientation that often affects pilots; believed to have been the cause of John F. Kennedy Jr’s fatal crash). Every ounce of your being feels as if you are turning in one direction, while your instruments show the exact opposite. Very unsettling to the say the least.
Despite my vertigo and a tough start to the month, I rallied and was able to scratch out a small profit for the month on 5 winners and 4 losers. It pays to trust your “instruments.”
Free Downloads: Want a copy of my recent presentations at the NY Traders Expo or to Woodie’s CCI Club on the Russell 2000 futures? Simply sign up for the free Daily Update email from the drop down on the home page or click here.
Member Downloads: This is a new section of the site for members only. Useful tools like Marc Chaikin’s Volume Spike indicator are now available.
New Markets: I know I sound like a broken record, but probabilities for the equity markets (e.g. ETFs) are indeed coming soon. Better to do them “right,” than fast.
MTG Gap Fader Demo: Check out this 12 minute “sneak peak” at the software provided with my mentorship program. It’s so easy, a caveman could use it… For more information, please go to the “Gap Fader” Mentorship Program page.
Please note: Membership is not required to receive a nightly email with a link to these daily Gap Wrap updates & tips. Simply sign-up via the drop-down window on the home page or click here.
|
Manage your subscription
View message
Comment on this message
Receive as RSS
del.icio.us
Digg
reddit
Facebook
StumbleUpon