Overnight Overview for 4/17/14

Wednesday was another rally day for the market, but another quiet day for most of us looking to trade the overnight. Below is a look at the Odds Sheet as it stood at the close.

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The only index security we track that was meeting the min criteria for a trade was NQ. And in fact NQ did not meet the min criteria until ti took a sharp fall just after the 4pm NYSE bell. But ES is what I trade, and it’s 1.10 Average Profit Factor was not near the 1.30 minimum I look for. The EdgeFinder pointed to the Holy Thursday propensity for the market to gap up that I discussed on the blog yesterday. Overall, the things we look at here at Overnight Edges just weren’t providing a strong consensus. So I again sat out.

In the end it mattered very little to me since ES opened this morning with just a small gap up of 0.50 points. Some traders in the room did take NQ, and they likely made out well, since it gapped up 10.50 points to start the day.

Happy Easter, enjoy you’re long weekend, and rest easy!

 

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Updating the Night Before Holy Thursday

Last year I showed that the Thursday before Easter (also known as Holy Thursday) has shown a bullish inclination over the years. I broke out that performance by overnight vs. intraday returns. I decided to update the research today. Overnight returns will be shown here. Intraday returns can be found on Quantifiable Edges.

The study below uses SPY to show historical overnight performance from Wednesday’s close to Thursday’s open before Easter.

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The numbers here are all strong. Gross overnight gains have been near 6x the size of gross overnight losses. Gaps up have been both substantially larger and more frequent than gaps down. Below is a list of all the nights.

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I would note a couple of things. 1) All 5 instances that gapped down on Holy Thursday saw their gaps fill at some point during the day. 2) About 60% of the total gains seen on Holy Thursday over the last 20 years have come the night before, rather than during the day. Traders may want to keep this in mind as we approach the close today.

For a more detailed view of intraday returns, check out the Quantifiable Edges blog.

Good luck if you trade tonight, and rest easy!

 

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Overnight Overview Catch-Up 4/11 – 4/16

Things have been hectic here and the Overnight Overviews have suffered. So I’ll cover the last few night’s briefly in this post.
Thursday night’s Odds Sheet is below.

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The decision was pretty easy for me to sit out, and it turned out to be the right one as ES gapped down big on Friday morning.

Friday evening the action was more interesting. Unfortunately, I neglected to grab a screen capture of the Odds Sheet. The way things set up, ES needed to close at 1811.50 or lower in order for ES Odds to meet the minimum long criteria. I indicated I was going to go long if that happened. I put in an order with about 4 seconds left to go until the close, and I was filled at exactly 1811.50 with 2 seconds left. But then ES ticked up and closed at 1811.75. This invalidated the signal I was trading on. Therefore, I indicated that I would look to get out of the position with at least a scratch when ES opened for its late session between 4:30 PM EST and 5:15 PM EST. But I would not sell for a loss if it gapped down against me at the 4:30 open. I felt there was an upside edge, and if I couldn’t get out with a scratch or a small profit, then I would hold the position and use a normal stop and target. As it turned out, ES opened at 430 at 1811.75, and I was taken out with a 0.25 point gain.

If ES had closed one tick below are, or if I had just decided to hold the position and traded, it would’ve worked out quite nicely. After a fairly scary dip Sunday night, ES fought its way back and opened up strongly on Monday morning.

Next we have Monday afternoons Odds Sheet.

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This time there was nothing really borderline about setup. I sat out. ES did gap up pretty strongly on Tuesday morning.

Now for yesterday’s Odds Sheet.

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When it shows up all white like this there is very little chance I will take a position. There was one EdgeFinder study yesterday suggesting a longside edge, and that is the direction we were talking about in the trading room, but the Odds just weren’t there. So I again sat out. This morning did get off to a good start, with ES gapping up 9.75 points.

I’ll be back a little later with some research for tonight.

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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An Opportunity Missed & A Successful Mindset

Wednesday saw the market rally strongly, but the overnight Odds suggested a possible short opportunity. Let’s take a look at the Odds Sheet, then I’ll discuss how I handled it, and how it played out.

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As you can see, ES saw its Averages highlighted in orange. This means that they met the Overnight Edges standard minimum criteria for a short trade with an Up Gap % less than 45% and a Profit Factor less than 0.91. Most of the other major index securities we track also showed bearish Odds, but none were bearish enough to meet the minimum criteria. The EdgeFinder turned up blank. With ES meeting the minimum short criteria, I considered taking a short trade. But the numbers were not confirmed by any of the other index securities, nor were they confirmed by the EdgeFinder. I ran a few studies in the Trade Discussion Room on Wednesday afternoon, and they suggested the bearish edge was perhaps not as strong as the Odds Sheet was suggesting. So after some deliberation, I passed on taking a trade.

ES saw a fair amount of overnight movement. When it opened this morning it was with a gap up of 0.75 points. So at first blush, it may appear that I made the right decision. But if I had taken the trade, then I would’ve used the standard calculated target, shown on the Odds Sheet at 6.80 points yesterday. ES did have an overnight dip that bottomed out more than seven points below the 4:15 PM closing trade. So while I was “right” in that the market did not gap down this morning, I actually missed out on a decent winner. It’s certainly frustrating when that happens, especially during times like I have had recently with very few trades.

Missed opportunities are simply part of trading and part of life. Dwelling on them will do us no good. Instead, I simply need to be ready for the next opportunity. I also need to make sure that frustration at missing this one does not lead me to take undue chances in seeking another. As a trader it is important to use a steady approach so that you may trade with conviction and an edge on your side. But you also need to understand that no matter how steady your approach is, opportunities and profits will not be steady. Markets (and life) do not work that way.

Have a great night trading, and rest easy!

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Overnight Overview for 4/9/14

Yesterday was a bit of a crazy day here at Overnight Edges, since I had a presentation to give after the close and was dealing with technical difficulties starting in the last hour of trading. Fortunately for me, market action was not suggesting any kind of substantial edge, so my trading decision was an easy one. Below is a look at the Odds Sheet as it stood near the close.

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The Averages were all white, meaning nothing was meeting either the minimum long or the minimum short criteria. In fact, everything was pretty close to breakeven. And with the EdgeFinder blank, there was really nothing for me to do. So that’s what I did – nothing.

And though there was not an edge suggesting it, the night did turn out pretty well for ES futures, as they gapped up 5.75 points to open the day.

I’m keeping this brief today. The Overnight Edges Trade Discussion Room will be open both today and tomorrow. Good luck if you trade tonight, and rest easy!

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Overnight Overview for 4/8/14

There has been an unusual number of borderline setups making for difficult overnight trading decisions lately, and Monday was another one. Here’s a look at the Odds Sheet as it stood near the close.

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As you can see, there was some green on the screen Monday afternoon. SPY, DIA and NQ were all meeting the Overnight Edges standard minimum criteria for a possible long trade. But ES is what I trade, and it’s Odds are the ones I pay closest attention to. They were moderately bullish, but not quite strong enough to meet the minimum criteria. There were some EdgeFinder studies that made the setup more compelling from a bullish standpoint. And I nearly decided to take an overnight trade based on all the above information. But Price Action Odds were not strong. If ES could have closed at 1839.25 or higher, then the Price Action Odds would have increased some. Therefore, I indicated in the Trade Discussion Room and on the note board that I would take a long overnight only if ES closed at 1839.25 or higher. It missed doing that by a point, and therefore I did not receive a fill.

As it turned out, ES gapped down 1 point overnight while NQ, which did meet the min criteria, gapped up 3.25 points.

I am going to be speaking at the festival of traders this afternoon at 4:45 PM EST. The talk will be about short-term edges. I will discuss edges related to both swing and overnight time frames. You may click here for more information and to register for this free event.

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Overnight Overview for 4/7/14

Friday saw the big selloff for the market, and left overnight traders with a few things to consider. Let’s start by taking a look at the Odds Sheet as it stood near the close.

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Four out of the eight index securities we track were showing Averages bullish enough to meet the Overnight Edges standard minimum criteria for a possible long trade. But I trade ES, and ES Odds were somewhat weak. Price Action was mixed and Seasonality was mildly bearish. Only Internals looked strong. Additionally, we had some studies causing some concern. So I determined it was a do-nothing night for me.

As it turned out, that was the right choice. Futures had a tough Sunday night and Monday morning and opened down six points below Friday’s close.

Good luck if you take a trade tonight, and rest easy!

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Overnight Overview for 4/4/14

Thursday made for an interesting decision. Let’s take a look at the Odds Sheet and then I will discuss it a bit.

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As you can see, both ES and SPY were meeting the Overnight Edges standard minimum criteria for a possible of an Average Up Gap % > 55% and Profit Factor > 1.3. And both NQ and QQQ were very close. There were a couple of fairly sizable considerations that I took into account in addition to the Odds Sheet. First, Thursday’s close left ES at a 200-day closing high. While this has not been as bearish in recent times, it’s still not a place where I’m terribly comfortable taking a long overnight trade. Second, the employment report was due out Friday morning. And while Employment Days have been on a real hot streak for overnight traders, it definitely adds an element of risk to the setup. Additionally, there was other evidence in the EdgeFinder suggesting a possible bearish edge. So with ES odds just barely meeting the minimum criteria, risk somewhat elevated, and other studies causing concern, I sat out.

In this case, my conservative approach cost me, as ES gapped up 8.25 points to open the day on Friday. It’s unfortunate when I miss out on a potential winner like this, but given the same set up I would make the same decision next time. If I am going to take a position overnight going into an Employment Day, then I’m going to want to see strong evidence, not conflicting evidence.

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Updating the Employment Report Hot Streak

I have shown the study below a few times in recent months, but the hot streak has remained so strong that I felt it deserved an update. The stock market has been loving the Employment Report over the last 20 months. 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. In recent times, 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. Seventeen of the last twenty instances have gapped up, and the average open has seen ES gap higher by more than 6 points! Below is the full list of instances for those that desire more detail.

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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 20 months 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 very hot, but I still just consider it a streak – not a time-tested edge.

Good luck if you trade tonight, and rest easy!

 

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Overnight Overview for 4/3/14

Wednesday was pretty cut and dry, so I am going to keep it short today. Below is a look at the Odds Sheet as it stood near the close.

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Most of the Averages were showing moderately bullish numbers. NQ and IWM were the two that showed strong enough Average Odds that they met the Overnight Edges standard minimum criteria for a possible long trade. But ES is what I trade, and it’s Odds were not even close. Additionally, the EdgeFinder was showing a few bearish studies. So there was definitely some conflict among our indicators. I look for a confluence of evidence in order to take a position, and Wednesday afternoon certainly did not provide that. Therefore, I sat out.

The night was pretty quiet overall, but a nice little run in the 30 min. leading up to the open caused ES to gap up 3.5 points and NQ to gap up 5.25 points.

Tonight should definitely be more interesting. I will have a fair amount to discuss in the Trade Discussion Room this afternoon, and I will post some research to the blog in a little while related to tomorrow’s employment report.

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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Overnight Overview – 4/2/14

Tuesday saw a breakout in the S&P 500 and some solid gains all around. And while the breakout might look promising for swing or intermediate-term traders, it generated some bearish edges for overnight traders. Let’s take a look at the Odds Sheet and then I will discuss a little further.

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Most of the Averages were showing up without being highlighted. Only TF was meeting the minimum criteria for a possible trade, and it suggested a short side edge. But there was quite a bit of discussion in the trade room about perhaps taking a short position overnight. The primary reason was that the EdgeFinder was filled with bearish studies. And a few of them looked quite compelling. Though I was a little tempted, I elected to sit out. Several short side edges have been dulled greatly over the last year or so, and I did not feel inclined to get aggressive when ES was not even meeting the minimum Odds.

As it turned out my caution was warranted as ES opened this morning with a gap up of 2.25 points.

Good luck if you trade tonight, and rest easy.

 

New to the Odds Sheets? Check out this video for a detailed explanation.

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April Nights – A Historical Look

With the calendar now turning I thought I would show how the overnight has performed during April historically.

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As you can see by the chart, April has generally seen a rise in the market during the night. The biggest dip in chart can be seen in 2009. Other than that year, ES either saw gains or moderate declines. Here is a look at the same chart, but with 2009 excluded.

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The upslope year appears quite a bit smoother. The point here is not that 2009 should be excluded. It is simply to demonstrate that without that year, you have a fairly smooth looking equity curve. And even with 2009 factored in, the overall slope points upwards. Overnight traders may want to keep April’s bullish overnight tendency in mind as they consider positions this month.

Good luck trading tonight, and rest easy!

 

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