Emini S&P Afterhours Behaviour Part 6: A Different Take On AH Price Levels

By Lawrence

In first few instalments of this series, I define the regular trading session as 9:30 am to 4:15 pm Eastern Time and that all trading outside of this are part of the After Hours (AH) session. Since CME changed the Regular Trading Session closing procedure, it became more confusing on how to define the after hours. I’ve decided to update the statistics on after hours price levels based on a more restricted regular trading session that matches the stock market opening hours from 9:30 am to 4:00 pm Eastern Time.

The Basics

The probabilities of the AH price levels being tagged in the regular trading hours since 2012 is as follows:

The chance of hitting both AH high and AH low is just 20%. Very useful clue to lean on if a day already shows the sign of trend continuation.

The chance of tagging AH mid is at 70%. If a trading day open far from AH mid yet stay away from either extremes, we have to be prepared that it is likely to be tagged first. It is even more likely if the gap fill direction points towards the same potential.

First Touch

One of the 3 basic AH price levels would be tagged first in the regular trading session. The probabilities are presented below:

Notice AH Mid is tagged first almost half of the time while the extremes are responsible for the other half.

The Conditionals

Given AH high being tagged first, the probabilities of the other AH price levels being tagged is as follows:

The statistics tells us that if a trading day starts with AH high tagged first, we are more likely to see upside range expansion than a significant sell off.

There is a recovery of the chance for AH High + 50% to be tagged comparing to the statistics I reported back in Part 4. This is where things are getting very interesting. By changing the the definition of after hours to the one I am using now, the probabilities are more stable and consistent. In fact, using data going all the way back to year 2006 has shown very similar results.

The implication of this consistency is very important. It tells us that the closing at 4 pm is more important than whatever time CME chooses for the future closing is.

Given AH low being tagged first, the probabilities of the other AH price levels being tagged is as follows:

The statistics here tells us that a trading day started with AH low tagged first often lead to a strong bounce at least touching AH mid. This shows us how ES behaves differently when it is moving lower.

Given AH mid being tagged first, the probabilities of the other AH price levels being tagged is as follows:

The statistics here tells us that if a trading day starts out tagging AH mid first, it is more likely to be trapped in range.

Summary

By studying the relationship of Emini S&P after hours price levels and the price actions happening in the following regular trading session, we have learned that there are certain basic biases that we can lean on during the trading day. They may not be very strong statistical biases but being mindful of their existence can help us create better intraday trading strategies. Awareness of how a day will likely unfold can help us interpret our charts with the correct context in mind.