http://tradeflight.com/

2009 ES Gap Fill Summary

January 5th, 2010 • Futures • Comments Off

Many traders regard the gap fill on the E-mini S&P 500 futures contract (designated on many trading platforms by ticker symbol root ES) as one of the highest probability trades each trading day.

Well, let’s see if the statistics held true in 2009. The gap fill is defined by price action that touches or breaks through the closing price of the previous trading day.

Since many traders regard the 4:00PM Eastern Time close as the gap to be filled, we’ll use the 4:00PM closing time for our analysis. Many trading platforms show the ES closing prices based on the 4:15PM session close, so custom tweaks are required to show the previous trading day’s 4:00PM closing price.

In this analysis, we track the number of trading days the ES filled its gap, or at least touched the 4:00 closing price from the previous trading day. We also observe the hourly time slot the ES first fills its gap on gap fill days.

Traders often regard the half gap fill as an even higher probability trade. The half gap is defined as half the distance between the opening price at 9:30AM Eastern Time and the previous trading day’s 4:00PM closing price.

No surprise here: Further analysis of the ES reveals that the half gap fill was truly a higher probability trade in 2009.

IMPORTANT DISCLAIMERS
Of course, past performance and 2009 statistics are no guarantee for future results. And, 60-80% probabilities do not necessarily reflect optimal trade entry and exit execution points. Finally, not every trading day affords a gap fill or half gap fill that is worth taking. Traders must ask themselves whether the remaining distance to the gap or half gap is worth the risk:reward ratio involved from the point of entry and stop loss levels. Often, ES gap fill trade setups occur in premarket globex trading hours, before the 9:30AM opening bell. Trades always require discretion and should never be placed blindly. However, astute traders keep these things in mind as they observe what many regard as one of the highest probability ES trades.

FUTURE ANALYSIS
We can continue our study of ES gap fills by considering 4:15PM closing prices, the average number of points for trades placed precisely at 9:30AM market open, option expiration day Fridays, etc. Perhaps we’ll revisit a few of these in the near future.

Market indicators summary 1/6/10

Vix,vix/vnx: oversold, vix/vnx turnup
US$/Euro: oversold, little room for down
TLT: oversold
GLD: oversold/turnup
NYSI: up
NYMO: peak
NYAD:
NYHL: peak

EW:

Fib tgt: 1136/1138

Market indicators summary 1/5/10

Vix,vix/vnx: little room to go down
US$/Euro: still has some room to go down
TLT: oversold
GLD: oversold/tick up
NYSI: up
NYMO: up
NYAD: peaked
NYHL: overbought

EW:

The last half hour sell-off may imply people are nerves about an anticipated pullback for the new year, and they want to get out of the market right before entering 2010. The sell-off could very well mark the end of the run-up, and the beginning of a down swing. However, Es is near some support levels and has already bounced quite a bit after hour. Watch for the 1115 level, see if the sell-off will continue from there. As both MACD and STO give sell signal, to play it Buy spy Feb put 110 into market strength if there is any strength on Monday.

On daily charts, the C wave run-up for all major indice may have been already finished.

The inter-market indicators, eventually all point to the same down direction for uncle Sam.

For ES trade, look for short entry around 1115 and long around 1108 Sunday night and Monday morning.