for lack of a better word, is good.
The average overnight S&P move has been 12.8 times larger when the S&P closes in the bottom decile of the days range when compared to a random overnight move. Compared to a random overnight move the average return when the close is below the prior days low is 11.6 times larger. One can use these studies as a building block to develop short term trading edges.
Click on link for performance stats http://ripetrade.blogspot.com/2008/12/closing-action-in-s.html
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(8 votes, average: 4.38 out of 5)
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Sample size?
When the x is a complex function of Y, time to sell. So you saying vol is contracting>
Random,
The sample size the entire data base for the big S&P contract 6725 trading days tested. Bottom decile days occurred 705 times and days with a close < prior days low occurred 1565 times.
Anonymous,
In general a close in the S&P that is at or near the low for the day has an overnight bullish bias and a close that is below the prior days low has an overnight bullish bias. A close that is at or near the days high has an overnight bearish bias and a close that is above the prior days high has an overnight bearish bias.