Market Extra: Why the S&P 500 ETF’s rare triple ‘gap ups’ isn’t a buy signal

by | Nov 6, 2023 | Stock Market

The SPDR S&P 500 ETF’s big rally last week was very rare, as it accomplished something that has happened only three other times since its inception 30 years ago. But rare doesn’t make it bullish, as history suggests there’s a good chance the SPDR ETF
SPY,
which is also known as Spider, will suffer through some weakness over the next few weeks.

Jonathan Krinsky, technical analyst at BTIG, pointed out that the SPY ended last week with three-straight “true-gaps” higher. A “true gap” up is when a daily charted instrument’s intraday low is above the previous session’s intraday high, leaving an empty space in the chart.

SPDR SPY has back-to-back-to-back gap ups for just the 4th time in 30 years.

FactSet, MarketWatch

The SPY low on Friday of $433.01 was 0.5% above Thursday’s intraday high of $430.92, Thursday’s low ($426.56) was 0.7% above Wednesday’s high ($423.50), and Wednesday’s low ($418.65) was above Tuesday’s high of $418.53. Since SPY started trading in January 1993, it has only had three straight gap-ups three other times: the three-session stretches that ended March 13, 2019, Oct. 12, 2020, and March 31, 2023, according to BTIG’s Krinsky. Of those three, only the 2020 triple gap-up was the most like last week’s, as the final two gaps had at least 0.3% of space in the charts. What followed after that gap-up streak was a three-week selloff, in which the SPY fell as much as 7.3% to a five-week low of $326.54 on Oct. 30, 2020, before resuming their rally.

SPY fell for the next 3 weeks following the 2020 triple gap-ups.

FactSet, MarketWatch

On Friday, the SPY rose as much as 0.3% after the open, before reversing course to be down 0.1% in afternoon trading. After the 2019 triple gap-ups, the SPY traded sideways for the next few we …

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