Exhaustion Gaps In SPY

Yesterday (11th of July) SPY gapped up over 1% after finishing strong over the previous days. Here is a potential strategy for the short side:

  1. Yesterdays close must be at 10 day high (of the close, not the high)
  2. Today SPY gaps up at least 1.5 times the aboslute value of the 25 day average (of the gaps)
  3. Go short at the close
  4. Exit on tomorrows open (it works better on the open than the close)

In point 2 I have used 1.5 times simply to get enough fills. The higher the gap, the better the results (from 2005 until present):

P/L in % #fills Avg.
6.09 27 0.23

Here is the equity curve:

If we flip the strategy and do it on the long side we get this result:

P/L in % #fills Avg.
15.66 30 0.52

As we can see, not as stable on the long side!