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“Riches don’t make a man rich, they only make him busier.” – Christopher Columbus

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

After a bout of ferocious selling on Friday for stocks and into the weekend for cryptocurrencies, investors took some time to think things through over the weekend, and they’re taking a more optimistic tone. Futures on the S&P 500 are 1% higher, while the Nasdaq trades up more than 1.5%. Bonds are closed for Columbus Day, but gold is sharply higher with a gain of over 2% and trading just under $4,100 per ounce. Crude oil is also bouncing back with a gain of 1.5% but is still trading below $60.  It certainly could be worse, but even with this morning’s gains, the S&P 500 is still down well over 1% from Thursday’s close. The President may not like to see the stock market trade lower, but all the talk with China seems to have taken the shutdown off the front page of the business section.

S&P 500 futures are still up over 1% but off their highs from earlier in the session. We looked at all prior periods when the S&P 500 SPDR ETF (SPY) fell 2% in a session and then gapped up at least 75 bps at the open the following day. We originally looked at 1% upside gaps, but with SPY now teetering on a 1% gain, we widened the band. The overall results of both analyses were very similar, though.

The long-term chart of SPY below shows every prior occurrence when SPY gapped up at least 75 bps after a 2%+ down day since its inception in 1993. While there were plenty of similar occurrences during the bear markets of 2000 to 2002 and 2008 into early 2009, there have also been plenty of other occurrences at various points in the market cycle.