Down Gaps On the Rise

As one measure of market volatility, we calculate the cumulative number of stocks in the MSCI World Index that open at least 2% higher (or lower) than the previous close over a 65-day time period.  Extremes in the number of gaps often occur in conjunction with inflection points in the market.  As you can see in the following chart, we find that a very low number of gaps coincides with market highs while the number of gaps tends to spike during significant declines.



For the most part, down gaps reached decade-long lows in October 2014 and have been on the rise ever since.  The significant uptick in North America is particularly interesting--especially in light of what is, relatively speaking, a more resilient uptrend in the market.





Emerging World stocks appear to be no exception.