Stocks & Commodities V. 31:6 (20–24): Early Morning Activity by Anthony Trongone

Stocks & Commodities V. 31:6 (20–24): Early Morning Activity by Anthony Trongone
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Early Morning Activity by Anthony Trongone

Let The Trades Begin

Early Morning Activity

Can an analysis of early morning trading activity offer you a forecasting advantage in the opening hour of the equities market? Find out here.

When trading the spiders (SPDR S&P 500 ETF Trust) in the opening hour of the regular trading session (9:30–10:30 am ET), many daytraders overlook early morning trading volume as a forecasting indicator. Yet trading activity during the 7:30–8:30 am hour appears to have a strong impact on the direction of equities.

The early hours

I looked into this further and studied data from November 8, 2010, when the spiders (SPY) were at $122.37 (7:30 am) and reached a closing price of $156.24 (10:30 am) at the conclusion of this study on March 31, 2013. This spectacular run of $33.87 was impressive but the focus of my study was on trading from 9:30–10:30 am. In this opening hour, the summary performance of the spiders was $6.42 in these 600 trading days. If, however, you use early morning (7:30–8:30) trading volume as an indicator, can this performance be improved?

Before entering a trading position during the early morning hour, it’s a good policy to contrast its pricing volatility with the daily trading range (highest–lowest daily price) of $1.497. In comparison, its hourly average was $0.786. Given this disparity, you can expect wide price swings in this opening hour to deliver either strong gains or inflict massive damage.

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