The Number of Stocks Gapping on the Open is Lowest Since at Least 2006

August 21, 2014
By Knowledge Leaders Team in Uncategorized

We’ve explored on multiple occasions here and here and here the absolute collapse in volatility in most asset classes so far in 2014. Another way to think about the collapse in volatility other than measuring the standard deviation of daily price changes is to measure each day the number of stocks that either gap up or down at the open of trading. Generally speaking, more volatile markets experience a greater number of stocks gapping at the open of trading than less volatile markets.

In the chart below we measure the 65-day running total of both up and down gaps of 2% or more for individual stocks in the MSCI World Index (blue line, left axis, inverted) and compare it with the price of the index (red line, right axis). What we find is that the cumulative number of gapping stocks over the last 65-days is at the lowest ever going back as far as we have data. A low level of gaps has not necessarily been good for stocks when the trend reverses higher, but it appears that we are not there yet.


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