What’s the Chance the Market Closes Red After a Gap Down?

A gap down—when the market opens lower than the previous day’s close—can set a grim tone for traders. But how often does that early stumble lead to a red close, where the market ends below yesterday’s close? We crunched the numbers for the S&P 500 to find out.

There is a 70% chance the market closes red after a gap down.

Our backtest focused on gap-down days where the market opened at least 0.1% lower than the prior day’s close. The results are striking: there’s a 70% chance the market closes red, meaning lower than the previous day’s close, and only a 30% chance it recovers to close higher.

This lopsided probability suggests gap downs often signal persistent bearish pressure. However, that 30% recovery rate reminds us the market can defy expectations, especially with catalysts like positive news or strong buying. Traders spotting a gap down might lean cautious, but staying alert for reversal signals is key. In the market, nothing’s ever a sure bet.