Stock Market Actions After Multiple Gap Up Days, Analysis Using SPT ETF Since 1993

 stock here:

After this Face Ripping launch out of the recent up channel, I noted 2 big Gap Ups from the closing price to the opening price....aka markets moved most easily when the markets are closed and less money is needed to move them.    There were many bearish people at the beginning of the week, and they got their faces ripped off.   I went to cash on many positions, missing out on large gains, but had some Anti-USD bets like COIN, as well as Gold and Silver.    So it was a net positive week. 

But after 2 fairly large Gap up Days, I decided to so a bit of analysis using Excel.   What happens next?   So I got the entire data set of SPY since 1993 and proceeded to spend far too much time with it.   

If you want my spreadsheet, here it is on Box

https://app.box.com/s/ix5a0fdvq5b4t3ph5rhwjs88xznefhan

I started my blogging "life" with stock trading, lurking for years before making my first comment even, often on Slope Of Hope with Tim Knight.    Then came the Gulf Oil Crisis, and then.....Fukushima, after which I ran down many rabbit holes only to discover that the real difference between Conspiracy Theory and Conspiracy Fact, was usually just a matter of time.

Even in this Analysis of Gap Action, I uncovered a real conspiracy....wait for it.   LOL

If the third day is a down day that closes one of the gaps, it would be a "Upside Gap Three Methods" which traditionally was thought of as a bullish continuation pattern, but the patternsite lists it as 59% being a bearish reversal.   

https://www.thepatternsite.com/UpGap3Methods.html

Here are the numbers of consecutive large gap up days since SPY started in 1993 

For the case when there are JUST 2 large gap up days, and the third day is not also a large  gap up day (0.55%), there are quite a few negative gap down days, 72, versus 40 of the "smallish" gap up days.    

However, there are many large Gap Up Days on the Third Day, and Nine of the 27 have been since the Pandemic, just 18 of these between 1993 and 2019.   

A quick look at all the Gaps since 1993

And a look at SPY volume over the years, Curious how it is gently sloping downward after the 2008 Debacle.

AI Provides a Framework on Correlating US Dollar and S&P 500, Here It Is

 

Correlating the US Dollar Index ($DXY) with the valuation of the S&P 500 index or the SPY ETF over a 15-year period can provide insights into the relationship between the strength of the US dollar and the performance of US equities. You can use historical data and statistical analysis to assess the correlation between these two variables. Here are the steps to do this:

1. Gather Data: Start by collecting historical data for both the US Dollar Index ($DXY) and the S&P 500 index or the SPY ETF for the past 15 years. You can typically find this data from financial websites, data providers, or trading platforms.

2. Organize the Data: Organize the data into a spreadsheet or a data analysis tool like Excel or Google Sheets. Make sure you have both the daily or monthly values for $DXY and the S&P 500 or SPY ETF for the entire period you want to analyze.

3. Calculate Returns: Calculate the returns for both variables. Returns can be calculated by taking the percentage change in value over each time period. For example, you can calculate daily or monthly returns.

4. Compute Correlation: Use a statistical software or spreadsheet program to compute the correlation coefficient between $DXY returns and S&P 500 or SPY ETF returns. The correlation coefficient will help you determine the strength and direction of the relationship between these two variables.

5. Interpret the Results: The correlation coefficient will fall between -1 and 1.

   • A positive correlation (close to 1) suggests that the two variables move in the same direction.
   • A negative correlation (close to -1) suggests that the two variables move in opposite directions.
   • A correlation close to 0 indicates a weak or no correlation.

6. Consider Additional Factors: Keep in mind that correlation doesn't imply causation. Other factors may influence the performance of the S&P 500 or the US dollar. You should consider economic, geopolitical, and market-specific events that could affect these indices.

7. Analyze Trends: Look for trends or patterns in the data. Are there specific periods when the correlation is stronger or weaker? Consider what might have influenced these trends.

8. Monitor Over Time: It's important to remember that the relationship between the US dollar and the S&P 500 or SPY ETF can change over time. Continuously monitor and update your analysis as new data becomes available.

Analyzing the correlation between the US Dollar Index ($DXY) and the S&P 500 or SPY ETF over a 15-year period can provide valuable insights for investors and traders. However, it's essential to approach this analysis with a holistic view of the financial markets and the potential drivers of these movements.