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THE MARKET WHISPERER 32 1

for all the stocks comprised on the index? The cumulative meaning must
also be a gap up of a half-percent. Of course, some stocks may open with a
greater gap up, some with less, and perhaps even some with a reverse gap,
but the average must be at least equal to a half-percent.

Let us presume that the 500 top Wall Street stocks open with a gap.
What should happen next? Eighty percent of the money in those stocks
belongs to institutional rather than private players. Since the institutional
players, as we have learned, are interested in selling as long as the gap is
open, in most cases the market index gap will close exactly the same way
as the gap for a single stock comprising the index will close.

Gap Close for the ETF – SPY

Notice the openings for the last six trading days on this chart. They
all open with gaps, and they all close. Days 1, 3, 5 and 6 already close
perfectly on the same day, and days 2 and 4 close partially the same day
and complete the close by the next day. Based on these gap closings, can
we define a winning trade strategy? Of course we can!

Strategy Label: Closing the Gap for the ETF – SPY
• Entry point: at opening of trade, long or short in the direction of the gap

closing
• Entry conditions: the SPY must open with a gap of at least 20 cents, on

condition that the gap is no greater than 85% of the range of movement
of the previous day’s trading (the difference between the highest high