Volatility has come back to the market, both during the day and in the overnight. Let’s take a look and see what that meant for overnight traders yesterday. Below is a screenshot of the Overnight Edges Odds Sheet as it stood near the close.
As you can see, 4 of the 8 index securities we track were suggesting yesterday’s selloff was likely overdone and that we could see a bounce in the overnight. When the “Averages” columns are highlighted in green that means those securities are meeting the minimum long criteria. Additionally, there was one EdgeFinder study that suggested an upside edge. But there were also some signs suggesting caution. For one, Wednesday was the first down day following a 50-day high. Odds typically are not as good when the market is pulling back from an intermediate-term high like this, and that is not always reflected on the odds. But more important is the fact that ES did NOT meet its minimum criteria. It looked like mkight as we approached the 4 PM NYSE close. But the bounce in the last 15 min. of futures trading served to take away some of the potential overnight gains, and also increase the downside risk. I indicated on the Trade Discussion Room board that I would take a long signal only if ES closed below 1654.50. It finished above there, and in this case it helped me avoid a big loser.
ES gapped down 19 points to open the day on Thursday. Of course if I had taken an overnight trade I would have utilized a stop. The calculated stop for Wednesday would have been 12 points, which still would have been a pretty bad loss. Fortunately, the Odds Sheet once again did me right and helped me to stay out of trouble. I expect we will have some interesting things to consider as we approach the close this afternoon, and I plan to have the Trade Discussion Room open for a short while to share my observations with Overnight Edges subscribers.
Have a good night trading, and rest easy.
New to the Odds Sheets? Check out this video for a detailed explanation.
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