Gap Reversal or Continuation?

Do opening gaps reliably indicate either reversal or continuation for the balance of the trading day? To investigate, we relate opening gaps to subsequent open-to-close returns for SPDR S&P 500 ETF Trust (SPY). Using daily SPY closes and opens, both adjusted for dividends, from the end of January 1993 (SPY inception) through late March 2025, we find that: (more…)