30 Jan 2006 to 30 July 2009 Weekend Returns

In the histogram the labels refer to the hatch mark just to the right of the number.
So the big peak is in the bucket between -0.5% and +0.5%.

So I took prices for SPY from 30 January 2006 to 20 July 2009 to see. Of those 181 weekends, 129 Monday opens were with in one half of one percent of Friday’s close. Not much movement at all, 71% of the time. Another 11.6% of the time, 21 weekends, the move was greater than half a percent but less than one percent. Another 10.5% of the time the move was one to two percent. So the total for a move of less than two percent over the weekend is 93.4%, pretty good odds.

Outliers

The big moves were 6% the weekend of 10-12 October 2008, two returns less than -3%. One of them was the previous month, 12 – 15 September 2008, the other in the middle of February this year. There was a +3% move over the weekend 21 -24 November 2008. So many of the big weekend moves happened last Fall.

So weekends look pretty safe.

Here’s an updated Market Delta chart for the day’s trade. Note how volume at bid has consistently exceeded volume at the offer for the ES contract (bottom histogram); how we’ve remained below the volume-weighted average price (VWAP) all morning (red line); and how we have accepted value lower by trading increasing volume at lower prices (side histogram). The reason I have my chart set up this way is that it provides me with a quick, visual sense for the structure of the day’s trade.

Where I see traders making mistakes in trading this market is by focusing on what has been happening in the last few ticks of movement, rather than the emerging day structure. That has kept many traders out of the market–or on the wrong side of it–even as we’ve taken out the S3 level. A thorough market perspective also needs to look beyond the day timeframe; that shows how we have moved below last week’s lows and, so far, have accepted value beneath that level. Given that dynamic, bounces that stay below last week’s range become candidates for selling.
.