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What always seems like a great idea late one night, rarely looks good the next morning, and that’s what’s happening for a lot of stocks today. Many low to no quality stocks that were bid sharply higher yesterday, even after rallying to levels they probably had no business trading at, are down sharply this morning. The poster child for the move is Chesapeake, which is trading down over 40% after nearly tripling on Monday. Even with the pre-market declines, though, CHK is up more than 177% from Thursday’s close!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, European markets, economic data out of Japan, Australia, and Germany, global and national trends related to the COVID-19 outbreak, and much more.
With the S&P 500 poised to gap down just under 1%, we screened our database for prior occurrences where the S&P 500 tracking ETF (SPY) gapped down more than half of a percent after trading up more than 1% the prior day. We then broke out those occurrences by the day of the downside gap and calculated SPY’s average open to close performance on those days. Since 1994, there have been a total of 140 prior occurrences that fit the criteria. On those days, the S&P 500 saw an average rest of day decline of 0.08% with positive returns just under half of the time.
When the downside reversal occurred on a Tuesday (20 prior occurrences), the average rest of day performance was only slightly better at -0.06% with gains 45% of the time. While these results don’t provide much in the way of info for a Tuesday, we can at least be thankful the reversal isn’t occurring on a Wednesday or Thursday where rest of day returns have been the weakest. The only day of the week where SPY saw positive rest of day returns on an average basis was Friday (+0.30%).