Over the past couple of sessions as the market has awaited Fed Chair Powell’s testimony, the S&P 500 (SPY) has not seen particularly large gaps at the open. In fact, both on Tuesday and Wednesday, the opening gap was less than 5 bps in absolute terms. That is the first time with such tiny opening gaps in back-to-back days since December 28th. That being said, following the small opening gap yesterday, SPY would go on to have a much more volatile session intraday as it fell over 1.5% from open to close.

In the table below, we show each other time in SPY’s history that there has been an opening gap down of less than 5 bps followed by a decline of more than 150 bps from open to close as was the case yesterday. These types of moves have been rare with only 11 prior instances, the most recent of which was in August of last year. While today saw another small opening gap and has struggled to find a direction so far, following prior instances the S&P 500 has tended to fall further the following session with average declines one week out as well. While things generally appear more positive one month to three months out, returns are mixed relative to the norm. Meanwhile, 6-month returns tend to be much weaker than the norm with a median decline of 1.6% versus the median for all of SPY’s history of a 5.32% gain.

The past couple of days’ price action in which most of the move happens intraday is a bit unusual in another way as well. As we have noted in the past and shown in the first chart below, going back to the start of SPY’s trading in 1993, nearly all of its gains have come outside of regular trading hours. In other words, the moves in the past couple of sessions have essentially been the opposite of what is historically normal. However, that oddity is not exactly new. As we first noted roughly a month ago, for most of 2023 the after-hours strategy of buying the close then selling the open has dramatically underperformed the opposite strategy of only owning when the market is open. Although that relative performance has waned a little given the past couple of days’ moves, the point stands that most of the S&P 500’s move is happening during regular trading hours in 2023. As is always the case, past performance is no guarantee of future results.  

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