Futures traders: how consistently does overnight bias hold?

[KCalhoun]

Hey futures traders, can you help with this?

My question: how consistently, if at all do tonight's futures bias hold into tomorrow's open?

I'm assuming the larger the point value the more likely it is to hold, barring contrary headlines. For example when I look at cnbc.com tonight and it says dow futures up or down weakly eg <100 it's not significant, but if strong red or green 300 points it's more likely to be same bull or bear bias tomorrow morning?

The reason I'm asking is to see if we can gain an advantage by buying long vs short bias ETFs aftermarket based on futures bias night before , to profit from gap tomorrow.

Example: if at 7pmET cnbc.com shows dow futures -300 red would buying inverses like SQQQ TZA aftermarket likely gap up because futures held short bias overnight?

Or is it usually random?

I'm not a futures trader, hope you guys can help... thanks!

I'll test and post results to help everyone, I'm always looking for profitable edges.

 

[gaussian]

Anecdata but I have seen 1,000 point overnight losses turn into 400-500 point RTH gains. I suppose this could be because the Asian and European markets have yet to react to the RTH news of the previous trading day. You also have to remember liquidity is a concern in the aftermarket so losses might have more stickiness then they would in the RTH.

There's some evidence of an "opening gap" type strategy featured in Ernie Chan's books though I have not tested it myself.

 

[Overnight]

...
My question: how consistently, if at all do tonight's futures bias hold into tomorrow's open?

Or is it usually random?

I'm not a futures trader, hope you guys can help... thanks!

I don't think there is anything to be gleaned from overnight action. Last night was a good example on the June ES...

We were biased down into the close, and then kept going down. But then reversed back up into the open. In this chart from last night, timestamps are at the bottom in Eastern Time.

So from close to open was pretty much flat, even though it looked like down would continue. This happens most nights, the volatility, lately.

Basically, the overnight session is just as random as the RTH. You'll find the largest moves in blocks of times from 8PM to 11PM ish ET, and then about 2AM to 6AM ET. But where the ETH price ends up by the bell? It is all over the place on a day-to-day basis.

 

[Overnight]

Here's one you can look at tonight. We were CLEARLY biasing short at the close, and it is currently continuing. Let's see where we wind up in the morning.

First upper chart is the S&P into the close, second chart at bottom is ES ETH as of now.

 

[Cuddles]

it's gotta be fairly drastic in this environment....2%+ almost. Pre-covid volatility, I'd say 0.5% would likely hold direction next day.

 

[schizo]

Hey futures traders, can you help with this?

My question: how consistently, if at all do tonight's futures bias hold into tomorrow's open?

I'm assuming the larger the point value the more likely it is to hold, barring contrary headlines. For example when I look at cnbc.com tonight and it says dow futures up or down weakly eg <100 it's not significant, but if strong red or green 300 points it's more likely to be same bull or bear bias tomorrow morning?

The reason I'm asking is to see if we can gain an advantage by buying long vs short bias ETFs aftermarket based on futures bias night before , to profit from gap tomorrow.

Example: if at 7pmET cnbc.com shows dow futures -300 red would buying inverses like SQQQ TZA aftermarket likely gap up because futures held short bias overnight?

Or is it usually random?

I'm not a futures trader, hope you guys can help... thanks!

I'll test and post results to help everyone, I'm always looking for profitable edges.

You wanna look at the FAIR VALUE, not just blindly follow the overnight futures. Is it trading above or below the fair value and by how much?


Fair value explained: https://www.cnbc.com/id/44978444
Fair value premarket data: https://money.cnn.com/data/premarket/

 

[hafez50]

Zero correlation from after hrs initially . Many many times if futures down big by even 10 pm they reverse and are either barely down or green by rth. Correlation to opening is much much higher when futures strong green in early after mkt that they stay green till the rth.

 

[KCalhoun]

Thanks -- very helpful! Good to know re fair value and all the other tips.

Even a slight edge would help re how to trade long vs short bias ETFs aftermarket for overnight hold, based on futures strength/fv to anticipate next day gap direction.

Trying to figure out what edge we might get, figuring it out. May depend on prior day trend strength & direction, end at hod/lod, range, in vs out day etc.... will test, ideas welcome.

 

[KCalhoun]

Here's one you can look at tonight. We were CLEARLY biasing short at the close, and it is currently continuing. Let's see where we wind up in the morning.

First upper chart is the S&P into the close, second chart at bottom is ES ETH as of now.

View attachment 227743

Thx, good to know re time intervals ... charts very helpful. Right now futs only -55 which I assume is not significant.... interesting to figure it out

 

[Scataphagos]

As the stock index futures trade virtually 24 hrs/market day, they are subject to "developments" in both Asia and Europe... political announcements, economic numbers, CB actions, jawboning, etc.... which can either reinforce or reverse the last USA session. More of a strong correlation between RTH and overnight when the psycho is especially strong... like when the other CBs were quickly jumping off the cliff right after the Fed did so.