Gaps get filled, right?
And you thought this was the last certainty that you could cling to. For is it not true that battle-scarred old traders whisper through their nicotine-stained teeth, uncleaned for lack of funds, that the only certainty in this world is that "gaps* are always filled, usually sooner rather than later"?
And is this not an attractive idea, the notion that impetuosity or irrational exuberance in the market is always sooner or later replaced by sober analysis, bringing the market back to its senses?
And lo, we have only to pore over our beloved charts, like a Roman seer over his steaming pigs' entrails, to see, incontrovertibly, each and every gap on our charts filled, in time, and mostly within a few days. So is this not scientific proof of the almost god-like infallibility of the Gap Law?
Alas no, my friend. What is happening is that the gaps on your charts are becoming invisible because, as they age, you look them up over longer time-spans : for example, a gap on a day chart disappears when you look it up on a weekly chart, which you will tend to do as the day chart ages. If you have access to daily charts going back years, and you have the patience to trawl back through them, you will find gaps in daily charts that are ten years old or more. Like solidifying Aero chocolate, some of those 'bubbles' that we call gaps become trapped forever in the charts. Others, probably the majority, do indeed get filled. But if you hoist your petard to this mast, you will surely lose your shirt sooner or later, because everything is in the timing - many gaps take three months or more to get filled.
*A "gap" is literally a gap on a chart. Markets often "gap up" on good news, or "gap down" on bad news. This most often happens at market on opening, because the news in question was published while the market was closed.
The contents of this website are copyright © Tim Bowyer 2004-5 ~ All rights reserved ~ No reproduction
in any form allowed, except for Appendix 2 for non-commercial use. This website is managed by Active Audiences.