A record string of gaps

Stocks are on track to gap higher yet again on Tuesday. This would mark the 5th consecutive session with the futures opening more than 0.5% higher than the prior close.

The last time that happened was...never. Stocks have never put together this many days of opening so much higher than the prior close.

If we look for times when the streak reached 4 days, then there were a few precedents, including earlier this month.

If we look for streaks of 5 days, but with only an opening gap of 0.25% or larger, then the sample size was still tiny and mostly the same.

In order to get a more meaningful sample size under somewhat similar conditions, we have to greatly relax the parameters. The table below shows times when the futures gapped up by any amount for 5 straight days while trading below the 200-day average.

All of these show below-average returns, a low win rate, and risk that was 2-3 times reward over the next couple of weeks. There were only 2 signals that showed positive returns across all time frames, meaning that at some point, there was a high likelihood of the futures pulling back instead of enjoying a "gap and go" rally.

There were a handful of times the futures gapped up 1% or more (which they're on track to do this morning) to at least a 30-day high while still in a downtrend.

Again, these saw limited upside in the days ahead, though a month later all but one managed to rally.