Fascinating Finding: Shifting Opportunity in the Stock Market

How much movement can we expect in the U.S. stock market (S&P 500 Index; SPY) during the day session, and how much movement can we expect overnight?

It turns out that the ratio of day movement to overnight movement has been shifting over time. I haven't seen this reported elsewhere, but it's been striking to those of us who follow markets both during U.S. day sessions and overnight.

During 2007, the median absolute change from open to close was .61%; the median absolute change from the prior day's close to the current day's open was .37%. Day movement exceeded overnight movement by about 63%.

2008 was a more volatile year, so we saw more absolute movement during both time segments. The median absolute change from open to close was 1.06%; the median absolute change from the prior day's close to the current day's open was .58%. Day movement exceeded overnight movement by about 83%.

2009, however, has given us a different look. The median absolute change from open to close has been .93%; the median absolute change from the previous day's close to the current day's open has been .86%. Day movement has only exceeded overnight movement by about 9%.

Stated otherwise, we've seen less movement during the day session from 2008 to 2009, but more movement overnight.

What that may tell us is that many U.S. market moves are occurring either in response to market movements overseas and/or in response to pre-opening economic releases. In terms of opportunity as a function of pure market movement, we've seen as much occurring between sessions as during them.

Note: See my follow up to this post.

Comments

[Larry House:]

Interesting, but what difference does it make?

Jul 02 12:13 PM

[Greyowl:]

It is bad news for day traders - they are missing out a lot of action and good news for swing traders and trend followers.


On Jul 02 12:13 PM Larry House wrote:

> Interesting, but what difference does it make?

Jul 02 02:03 PM

[Greg10:]

As the US influence over the world diminishes - better get used to it. I also suspect overnight moves are bigger on bullish days in the US than bearish days in the US.

Jul 03 08:18 AM

[Greg10:]

As the US loses dominance in the world this will only happen more.
I also bet overnight moves are bigger on bullish US days than bearish ones as the Asia decoupling theme (rightly or wrongly) takes hold.

Jul 03 08:20 AM