The Recent Contradictory Overnight Sessions and Daily Reversal

May 27, 2010: 7:55 AM CST

If you’ve been trading based on major headline news this week, you’ve been whipsawed so many times.  Even if you’ve been basing your daily bias off the opening gap, you’ve been whipsawed.

The last few days have seen a massive contradiction in where the overnight session traded and how the actual daily trading session resolved.

Case in point:

Tuesday: BIG gap down on economic news that the European recession is spreading… but the daily session was sharply HIGHER

Wednesday: BIG gap up on economic news that the European recession might not be as bad as forecast and the US fundamentals are improving… but the daily session sold-off hard into the close.

Thursday: BIG gap up on economic news that China is still investing in Europe and US Economics are improving… how will today play out?

Let’s see these seemingly insane (to the outside observer) market moves:

I’ve highlighted the daily sessions, as they are marked by the NYSE TICK, which only is available for the daily 9:30 – 4:00 EST session.

I’ve marked the closes with red hash-marks and the opens with green hash-marks, and connected these prices with black lines that show the overnight session volatility.

It’s almost comic how opposite the daily session has been from the overnight activity.

If you have access to overnight futures charts, it’s important to watch them to note the overnight session highs and lows, and to observe what happened while you were sleeping.

I would say that it makes a big difference in the next day’s trading session, but the last two daily sessions have been exact opposites of the overnight session -sometimes that happens.

Be safe – there are a lot of cross-currents out there and the market has shown it is willing to surge or plunge on headline news, which makes for very volatile conditions.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

2 Comments

2 Responses to “The Recent Contradictory Overnight Sessions and Daily Reversal”

  1. SA Says:

    Including the overnight trading in ES there seems to be an inverted head and shoulders pattern where the head's height is about 48 points.

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