The Employment Report Overnight Hot Streak

I have shown the study below a several times in the past, but not for a while. It examines the recent performance in the overnight futures market on nights the Employment Report has been released since the summer of 2012. The Employment Report is released at 8:30 AM Eastern (normally the 1st Friday of the month) and it is often followed by a quick move in the futures. This will typically mean increased overnight activity and a more volatile open. Over the last 3 years that volatile open has been to the benefit of the bulls. This can be seen in the study below.

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The numbers here all strongly favor the bullish case. ES has gapped up 72% of the time and the gross overnight gains have been nearly 4x the gross overnight losses. Below is a profit curve to see how the edge has played out over time.

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Despite some up and down in recent months, that is a pretty straight line – an encouraging sign for the bull case. Of course while the Employment Report will be a big factor in where the market gaps tomorrow, there will be other factors to consider as well. I’ll consider everything at my disposal (Odds Sheet, EdgeFinder studies, etc.) before making a decision. Traders that do take an overnight trade should be prepared for increased volatility and have a plan on how they wish to handle it.

It is also worth noting that the last 3 years have not been typical. The market has seen a number of hot and cold streaks with regards to the employment report over the years. The current streak is strong, but I still just consider it a streak – not a time-tested edge. To see why I say this, check out the curve below, which goes back to 2000 and puts it in perspective.

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I will discuss this in more detail along with live trading analysis at the ‘Intro To Overnight Edges’ live webinar today at 3:30pm EST. (click for more details & to register)