An Unfilled Gap Up And Fresh Closing High Would Trigger This Compelling Overnight Edge

ES got off to a strong start this morning and is threatening to close at a new high today. In the past I have shown that closes at new highs will sometimes be followed by a pullback overnight. But there are a couple of things that make the possibility of a new high today a little more interesting. For one, ES has been basing for a couple of weeks. Today would be the 1st new closing high in over 10 days. Secondly, the market gapped up this morning and has not filled so far. On a swing basis, this can be viewed as a sign of strength. This morning I wanted to look and see if this combination of circumstances had led to a substantial overnight edge in the past. So I ran the study below:

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The numbers here suggests intraday strength and the fresh breakout to a new high do not generally follow through to the next morning. There appears to be a bit of a reversion edge for the overnight. I also examined the profit curve to see how this setup looked over time.

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The fairly steady move from upper left to lower right seems to confirm the downside edge. If the day finishes well, traders may want to keep this in mind as we approach the close.

 

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