My pre-market comments:

"Hello Gappers! 

As of 9:10 AM EDT, most indices are showing small gaps down in mixed zones.

Risk Factors

• Gap Guides:  most indices finished flat and in mixed directions on Thursday, as such the probabilities and profit factors for today are very mixed and not compelling for a fade in either direction
• Special Day: Friday of Options Expiration week is historically weak for fading DOWN gaps  22/42 and .95 PF; when below 200 DMA: 13/24 1.1 PF  (but very good for UP gaps)

Supporting Factors

• Supportive Patterns:   fading down gap that are above the prior week's close on Options Expiration Friday appears to be OK: 16/25 (64%) and 1.5 PF
  

Bottom Line:

Friday's setups look weak for a gap down and not worth the risk in my opinion. If the markets rally into the open by chance, a short fade would be a good speculative trade IMO due to the strong historical bias for fading up gaps on Options Expiration Friday. TRADE AT OWN RISK!"

Gap Wrap

The markets weakened leading into the opening bell and then dropped like a Rory McIlroy putt on the first day of the British Open (apologies to non-golfing fans). As a result, this was a "good call" to pass on these gap fade setups as the S&P e-minis are already down almost 8 points in the 20 minutes since the open.

I ran some "end of day" studies for gaps down on OpEx Friday during weak markets (e.g. <200 DMA, etc.) and none showed any unusual bearishness. In fact, most showed an above average probability of finishing above their opening prices. But they did not consider the current short term over-bought conditions, so it will be interesting to see if today's action stabilizes shortly or continues southward.

It's our last day at the beach on vacation, so I am calling it a day. I'll be back in the office on Monday. Have a great weekend!