Down At The Open; Up By the Close

Tuesday's market opened lower, but closed higher by almost .40% on SPY. Going back to January, 2003 (N = 761), we have 122 occasions in which the market has opened lower but rose more than .3% from open to close. Although this would seem to indicate market strength, there is no distinct edge going forward. Indeed, the reversal days slightly underperformed other days with respect to next day performance. After the reversal days, the market was down by -.06% (60 up, 62 down) the next day. The remainder of the days in the sample were up by the next day by an average .07% (363 up, 276 down). It will be interesting to test longer-term reversal patterns to see if they sport any advantage.