Learn how to use the Gap Guides via this short video. View the gap zone map here. Learn about the First Hour Guides and view a video here.

Join Scott every Thursday at 9:00 am ET for live pre-market analysis of the opening gap: register here.

Read the newest "Member Spotlight: Andy from Illinois" -  a long time member of MTG who shares how he has generated significant profits over the past 12 months using the Gap Guides. 

Watch for Scott's 2011 Annual Wrap to be released to Members and Daily Wrap subscribers in early February!

==========================================================================

Pre-market comments: (posted for members at ~9:20 ET daily)

==========================================================================

Greeting Gappers! As of 9:10 am ET, the indices are showing nominal gaps in mixed zones and directions.

Risk Factors

• Gap Guides:  overall the indices are showing neutral win rates and profit factors for fading DOWN gaps today in the U-CO zone.

• Unique Day/ Patterns (with MTG stop parameters):
  • Fading DOWN gaps when > 10 DMA and 10 DMA > 200 DMA and 200 DMA > 50 DMA: 22/39 wins (56%) and .8 PF
    
    • If Monday: 5/10 wins and .6 PF
      
  • Fading DOWN gaps on Monday after Options Expiration when > 10 DMA: 11/23 wins (47%) and .7 PF
    

• Closing Variance: nominal today
  

Supportive Factors

• Gap Guides:  most indices are showing positive win rates and profit factors for fading UP gaps today in the U-H or U-HC zone (but note: that Seasonality filter (Monday) is showing that the setup is historically riskier than average)
  

• Unique Day/ Patterns (with MTG stop parameters): 
  
  • Per weekend wrap, fading gaps on Monday after a 100 day high close:
    
    • DOWN gaps: 11/14 wins (79%) and 1.4 PF
    • UP gaps: 10/16 wins (63%) and 1.2 PF (note: using end of day stop: 12/16 wins (75%) and 2.2 PF
  • Fading UP gaps on Monday following Options Expiration when > 10 DMA and > 200 DMA: 11/16 win (69%) and 1.6 PF
  • Fading small and mid-sized UP gaps (<40% of the 5 day ATR) after an NR7 day (most narrow range day of past 7) when > 10 DMA: 62/79 wins (78%) and 1.7 PF

Bottom Line:

If the ES opens down, I will NOT fade the open.

If the ES opens up by at least 1 pt, I will fade the open with a reduced position size and likely hold some for the extended target.  TRADE AT OWN RISK. Scott

(Note: unless stated otherwise, all research data shown above is based on the S&P 500 (ES or INX) for the past 10 years, including commissions, but not slippage.)

==========================================================================

Results

==========================================================================

The markets opened basically flat with the ES opening down 2 ticks, so there was no trade for me.  After the bell, the markets rallied hard for almost an hour, but stalled after running stops just above R2 at 1316.25 (as shown on the MTG Price Guides).

The Gap Guides showed a general short bias, but some end of day studies I ran for the trading room showing some bullish pressures in play, and the First Hour guides show no compelling setups (though the low fade did have some positives), so I passed on the entire day. No probability trades and no discretionary trades for me. I focused instead on our 2012 plan for MTG services and enhancements. 

A couple of admin notes:

1) We had trouble publishing the new improved First Hour Guides today, so we reverted back to the old guides until we could publish the new ones on the site around mid-day. The data was very similar, so no trades were missed, but we do apologize and have rectified the issue moving forward.

2) We've decided to delay my 2012 Annual Wrap and combine it with the January wrap into one release at the end of the first week of February. So stay tuned for a review of the past couple of months and last year, an outstanding member spotlight, and an overview of enhancements and new research services that will be provided to existing members by end of Q1 at no additional charge!

==========================================================================

Tip for Tuesday

Historical results for the past 10 years when fading gaps (targeting gap fill) after a 100 day high that closed below the prior day high (using an end of day stop):

• Down gaps: 29/38 (76%) and 2.0 PF
  
• Up gaps: 31/42 wins (74%) and 1.2 PF
  

Note: I will rerun these numbers using MTG stop parameters, as well as consider other unique patterns and charasterics of the current setup for our members in the morning.