The weekend gap on gold

The weekend gap is the space between Friday's last price and the first price after the market reopens. Gold trades through the week and shuts over the weekend, so news and price moves that happen while the market is shut appear all at once when it reopens. This page explains how the gap arises, the breakaway, runaway and exhaustion labels, and why the folklore that every gap gets filled is a habit of some charts, not a rule.

What the weekend gap is

A weekend gap is the difference between the last price before the market closes for the weekend and the first price after it reopens. On the gold chart, the market closes on Friday and reopens after the weekend, and the gap is the space between those two prices. The gap can be up or down. If the first price after the reopen is higher than Friday's last price, the gap is upward. If it is lower, the gap is downward.

How this site's rule reads it: rule GP-1 counts a gap when a Monday bar's open differs from the previous Friday's close by at least 1 ATR, the ATR of that Friday (the average true range of the 14 sessions to it). It counts as formed when the Monday bar closes. The chart also marks the first later close back at Friday's close, if one comes within 10 sessions: that is the gap closing. Both instruments are in US dollars, COMEX gold futures in dollars per troy ounce and the SPDR gold fund (GLD) in dollars per share, so the gap is a gap in dollars, not a currency effect.

How the gap arises

The gap arises because gold does not trade over the weekend, but the world does not stop. When gold reopens, the first price reflects all of that news at once. The gap is the market's way of catching up.

The gap is not caused by anything that happened on the chart itself. It is caused by what happened while the chart was not being drawn. The chart has no data for the weekend, so the gap is simply the space between two prices that are separated by time. The gap is not a pattern in the candles; it is the absence of candles.

Breakaway, runaway and exhaustion labels

The labels breakaway, runaway and exhaustion are used to describe where a gap appears in a move. A breakaway gap appears at the start of a move, when price leaves a range. A runaway gap appears in the middle of a move, when price is already trending. An exhaustion gap appears near the end of a move, when price is running out of steam.

These labels are descriptions, not predictions. They are based on where the gap appears, not on what happens next. A gap that looks like a breakaway may not lead to a trend, and a gap that looks like an exhaustion may not be the end. The labels are a way to talk about the gap, not a forecast.

The folklore that every gap gets filled

There is a folklore that every gap gets filled, meaning that price will come back to the level of the gap. This is a habit of some charts, not a rule. Some gaps are filled quickly; some are filled after a long time; some are never filled. The folklore exists because gaps are often filled, but that does not make it a law.

The reason gaps are often filled is that price tends to revisit levels where it has traded before. But there is no guarantee. A gap that is filled is a fact about the past; a gap that will be filled is a guess about the future. The folklore is a habit of observation, not a rule of the market.

The gap on the chart

The chart under the heading is a weekend gap on the SPDR gold fund (GLD). The Friday close of 6 November 2020 was 183.19 dollars and the Monday open of 9 November was 176.42, a gap down of 6.77 dollars; Monday closed at 175.08. No later close came back to Friday's close within the next 10 sessions, so the chart carries no closing marker.

It is the cleanest by the rule's own measure of the 64 gaps that rule GP-1 found in ten years across the two instruments. It shows what one gap looked like. It does not show how often gaps close, and the page does not claim that any gap will.

What the gap cannot tell you

The gap cannot tell you why price moved over the weekend. It only shows that price moved. The reason for the move is in the news, not in the chart. The gap also cannot tell you whether price will fill the gap. That is a question about the future, and the chart only has the past.

The gap is a description of what price has already done. It does not predict what price will do next. A pattern describes what price has already done and does not predict what it will do next. That is the plainest way to say it, and it applies to every pattern on this site.

What the count says

Over ten years of daily bars, rule GP-1 found 64 weekend gaps of at least 1 ATR: 6 on gold futures and 58 on the SPDR gold fund. The two instruments differ in kind, a futures contract on one side and a fund listed on a stock exchange on the other, and the tenfold difference in the count is a fact about these two series that this page does not try to explain.

A gap of 1 ATR or more is large by construction, so the count is a count of the large ones. Smaller weekend differences, which occur most weeks, are not counted and not drawn.

The gap is measured from the last print, not from the chart's imagination

The weekend gap is not the difference between two lines a charting package draws. It is the space between the last actual trade before the market closed and the first actual trade after it opened. Gold trades almost around the clock during the week, but the weekend stop is a hard stop. Whatever price appears on a screen after that stop is a real trade, not a continuation of Friday's mood.

The gap is a price, not a prediction, and the table makes that plain

Every gap on the gold chart looks like a promise. A gap up seems to say the market will keep rising. A gap down seems to say it will keep falling. But the gap itself is only a record of what happened while the market was closed. It is a price, not a forecast. The market can gap up and then fall for a week. It can gap down and then climb without looking back.

Checking a weekend gap yourself

Open the daily chart of the SPDR gold fund and find Friday 6 November 2020. Its close was 183.19 dollars. The next bar is Monday 9 November, which opened at 176.42. The difference, 6.77 dollars, is the gap. To see whether it is large by the rule's standard, take the fund's average true range over the 14 sessions up to that Friday and divide; the rule asks for at least 1 ATR, and this gap clears it.

Then look at the following ten sessions for a close back at 183.19. The chart shows none, which is why no closing marker is drawn. A reader can repeat this on any Monday of the stored history, and will find that most weekends do not produce a gap of a full ATR.

Where a gap is counted

A weekend gap is counted on the Monday bar, at the close of that bar, because the rule needs the Monday close to be sure the bar exists in full. That is why the chart ends a little after the Monday open and why the closing marker, if any, comes from sessions after it. Counting at the Monday close also means a gap that is reversed within the same Monday still counts, as long as its open was 1 ATR away.