It's relatively rare to see the S&P 500 drop 2% or more, then gap down at least -1% the next morning. It's rarer still to see that day (i.e. today) close above the opening price, but still below yesterday's close.

What this exhibits is severe selling pressure that was emotional (the gap down open), but the "smart money" was buying later in the day (the close was higher than the open).

As I type, the futures are flirting with the opening price, so we may not close above the open.  We'll just have to see if buyers have enough interest to push us up into the close.

If so, then it has typically resulted in a short-term pop higher.  The table below shows how the S&P 500 futures performed between what would be today's close and the opening price the following day, and also the day after that.

8 out of 10 times, the futures gapped up the next day, with one of the losses being tiny.  One was exceptionally large, but it was made up the following day.

By two days later, the futures were up 9 out of 10 times.  Again, though, the one loss was exceptionally large.  Even so, the overall risk/reward skew was very tilted to the long side.

For very short-term traders, a close above the open today looks to be a short-term positive...but with the caveat that in the past we've seen some wickedly volatile moves under somewhat similar conditions.

Jason Goepfert