Thursday, June 23, 2011

Half the Gains over the Past Year Have Been in the Overnight Session

One thing I've bemoaned since 2009 has been how so many of the gains have come in the overnight session.  For those who carry a lot of cash, and in a market that has generally been upward trending, it is hard to keep up with the averages when so much of the advance is not happening during the normal session.  Indeed what we have seen during much of this period is a market that gaps up, and sells off during the actual normal hours of operation- making it even more difficult to keep up with the averages.

Bespoke has run an analysis over a shorter time frame (the past 12 months) of the gains during the normal market hours versus overnight session.  It shows a 50/50 split between the overnight v regular session. 

While informative I personally would love an analysis that starts around 9:40 AM EST rather than 9:30 EST and consider that first 10 minutes part of the overnight session because when markets gap up they tend to surge forward in those opening 5-10 minutes.  Hence the momentum of the overnight session (especially if news driven) carries forward and while technically is part of the 'regular session' is essentially due to the momentum from the overnight session. 

If I had all the data and many hours to waste, it would be fascinating to see how much of the advance from March 2009 was between 4 PM and 9:40 AM the following day.  And how many of the 'magical moments' came on no news at all (recall so many rallies of 0.3-0.6% between 6 AM and 8 AM on no news at all).

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