June 1 Market Action Shows Importance of Watching Overnight Sessions

Jun 1, 2010: 10:35 AM CST

If you’re a futures trader, or just watch the overnight/pre-market futures for guidance on what to expect for the trading day, then you’ve likely been thrown for a few loops the last few days.

The futures will be sharply lower then right as the market opens, we’ll have a sudden surge higher… or vice versa where the futures point to a higher open, but the market sells-off sharply by mid-day or into the close.

I wrote about this three day in a row turn of events in my prior post:

“The Recent Contradictory Overnight Sessions and Intraday Reversals.”

However, there’s another benefit – that’s not so puzzling – that watching the overnight futures levels can grant you:  watching overnights highs/lows and congestion areas for possible turning points during the day session.

Let’s take today for an example:

(Click for full-size image)

The futures market was actually open part of the Memorial Day holiday Monday, so some traders could have traded that session.

Others who took the holiday could have referenced what happened during the non-NYSE Market hours for a reference for today.

The sharp sell-off did not result in a lower session, or at least we had another stellar intraday reversal up after a sharply down futures pre-market session.

However, what’s interesting is that the intraday high so far – as of 11:30 EST – came back into the congestion/range area of Monday’s (May 31st) session and then formed a reversal candle and began falling just shy of the 1,095 @ES futures level.

If you’ve ever heard someone saying “I watch the GLOBEX highs and lows for potential support and resistance levels intraday,” then this chart reveals exactly what they mean.

The “GLOBEX” or Global Exchange (non-NYSE hours) high near 1,095 was also the high – so far – for Tuesday’s trading session.

That’s not to say we can’t exceed that intraday later in the session, but it did serve as a sharp resistance level as price tested the GLOBEX highs… and price retraced lower.

You could have used that as a known profit target to play for if you were long from the morning rally, or as a spot to put on an aggressive short-sale position if you anticipated price would find at least marginal resistance there.

It’s an interesting example, nonetheless.

Corey Rosenbloom, CMT
Afraid to Trade.com

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


2 Responses to “June 1 Market Action Shows Importance of Watching Overnight Sessions”

  1. terlyn Says:

    I'm looking at a rounded reversal from at least 5/27.

  2. Corey Rosenbloom, CMT Says:

    Yes, I agree. If looking at the SPY, particularly the 15-min chart, it's a pretty compelling larger-scale rounded reversal. Good call!