Something has changed - a while ago

[PeterR]

I did this study early last year, but did not update it till today.
A bad oversight.

It compares holding a portfolio in SP500 futures only overnight (close to open) versus holding only during RTH (open to close).

Till summer 2015 the bulk of the advance in SP500 was made overnight.
So holding long a position overnight was the right choice.

But after the 1st leg down in mid 2015 till today any advance is made during regular trading hours.

IMO it still can make sense to hold a long position in profit overnight if one has a good reason for a swing.
But one should expect a countermove overnight - not more favorable advance.

What caused the change ?
I have no idea.
Do the Chinese sell overnight to raise money - is the overnight futures market enough for this ?
Do the Etfs work differently now - IMHO they were the main reason for the mean reversion character of the SP500 rth in the past.
Is this a healthy development - the strength coming from within US ?

I plan to not hold longs overnight, if I do not have a good lead and "only" entered based on some intraday development.

ES cv overnight vs rth 1605.pdf

[Pascal]

Hi Peter,


Thank you for this study.
Here is probably the reason:



If Japanese pension funds need to acquire US equities, the only possibility is during opening hours, because the available volume exists only during US market opening hours.

This is probably another sign that Japan's NIRP policy is holding the US markets up for now.
We need to track the BOJ meeting dates and see when they intend to revert their NIRP policy, because this could "crash" US equities.



Pascal

[PeterR]

no TLB at end of day 2016-05-31.
-> ride on.

[PeterR]

RTH was bought again.

[PeterR]

We had selling RTH and mkt rallied only during the asia session.
(without me :( )

[lguthrienyc]

Peter,

Thank You for sharing your analysis and the continued updates.

Lee

[PeterR]

some buying RTH

[PeterR]

TY Pascal,

the timing of the NIRP announcement is a strong argument.

So we have this "RTH- buying" now
and the "ETH-buying" of the past years is gone for now.

I agree the Japanese NIRP seems to be strong driver, I will have to monitor it more closely.

[Pascal]

TY Pascal,

the timing of the NIRP announcement is a strong argument.

So we have this "RTH- buying" now
and the "ETH-buying" of the past years is gone for now.

I agree the Japanese NIRP seems to be strong driver, I will have to monitor it more closely.

Indeed, but before starting the monitoring, it would be good to evaluate past occurrences when the RTH -Buying weakened.

You can see that the RTH-Buying comes by waves. Each waves is initiated by a strong push (Blue trend lines,) whihc is followed by some sort of support line (Red trend lines). It would be interesting to tray to evaluate the S&P500 gains 3 days, 5 days, 10 days and 20 days after that red trend line is broken. If you get a negative return, then I believe that monitoring when the latest Red trend line will be broken makes sense.



Pascal

[PeterR]

The buying during RTH session goes on.
No TLB.