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Nasdaq 100: Unfilled Gaps Are Surging

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On seven separate occasions this month, the Nasdaq has gapped up and not closed the gap all day long.

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"They" say that the first half hour or so of each trading day is influenced by bottled-up emotional trading, while the last hour or so is made up of more reasoned, rational trading.

If so, I wonder what that says about the Nasdaq 100. On seven separate occasions this month, that index has gapped up and not closed the gap all day long.

What I mean by this is that it opened the trading day higher than the previous day's close, and never traded below the previous day's close all day. That's an unfilled gap. And there have been seven of those in the past 18 trading days.

Let's look at the past decade and take a closer look to see if this has happened before. Indeed it has -- the red arrows highlight other times we reached seven days.



Here's the performance in the NDX six months later:

Date

6 Months

Later

01/10/00 0.7%
12/18/01 -35.9%
01/30/06 -11.9%
09/21/07 -11.3%
04/09/09 28.2%
12/22/09 0.3%
Median -5.5%
% Positive 50%

A couple of times, in 2000 and 2007, the NDX went mini-parabolic right afterward, but both times it came crashing down extremely hard soon thereafter.

Mostly what we saw was trouble, or at least an inability to sustain further gains. Six months later, the index was positive three times, but two of them were less than +1%. There was one exception, in April 2009, and that was just a total failure to precede any weakness as it was the kickoff from the extreme pessimism in March.

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No positions in stocks mentioned.

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