Emini S&P Afterhours Behaviour Part 5 – Time of Day Statistics

By Lawrence

When we look at Emini afterhours trading activities, it is important to remember that the US stock markets is not active during that time. Hence Emini S&P500 moves mainly as a proxy with the active markets trading in the world at the time. Emini S&P and its close relatives like Emini Nasdaq 100 become instruments that move more swiftly from one support / resistance zone to another due to reduced number of arbitrage activities. This gives Emini S&P distinct time of day behaviour that is different from the one we have during regular trading hours.

Time of Day Distribution

First let’s take a look at the time of day distribution of the afterhours high (AH) and afterhours low (AL) in percentage of the total number of trading days since 2007.

Technically, CME includes the 4:00 pm to 4:15 pm trading in regular trading session. And then they extended that lately all the way to 5:30 pm. This rearrangement, however, cannot change the fact that majority of stocks would not be trading after 4 pm. Hence, to understand afterhours trading, it is important to include the activities happened right after 4:00 pm stock market close.

Notice how Emini S&P has close to one fifth of its afterhours highs and lows printed within the 15 minutes right after the regular 4 pm close. From there, the rest of the time Emini S&P does not really have significant concentration of afterhours highs and lows until next morning after 8:15 am. This makes sense because 8:30 am and 9 am are the time slots for which economic reports are often released.

So far, it is not a surprise that the time of day distribution would look like this.

But how do we utilize the information?

Discretionary Approach

For discretionary traders, the range established during 4:00 pm to 4:15 pm obviously carries a lot of weight and can be used as the main support resistance zone throughout the afterhours period.

Following is an example of such approach.

But to get the best results, combining the range established from after 4:00 pm to the first 15 minutes after the official afterhours session started (i.e. 6:15 pm) is even better because the initiation process is not completed until then.

Here is the same chart with the expanded range. I also added range expansion lines on the chart to show that this reference zone actually matters.

Here is another example.

As a summary, discretionary traders who like to trade the Emini S&P in afterhours they should pay more attention to this expanded version of the open range.

Mechanical Approach

For those leaning towards mechanical approaches, the expanded open range concept can be exploited with breakout and counter-trend plays. Those are easy to construct and back tested. I will leave that to the readers to experiment on.

I am going to show a statistical approach to study the time of day distribution here.

Let’s take a look at the accumulated distribution instead of the distribution itself.

With this view of the distribution, we have a very interesting bias on hand. Namely, afterhours low is more likely to be in place by 3:30 am as the accumulated distribution crosses the 50% level while the accumulated distribution for afterhours high is lagging behind. This creates a unique opportunity for the long side given the right condition because you know the odds for more upside is now in your favour.

Summary

By looking at the time of day distribution, we can find clues on how to deal with Emini S&P afterhours actions. In recent years, Emini S&P overnight trading has picked up more volume. Although it is still not as liquid as regular trading hours and we have witnessed quite a few episodes of panic moves, Emini S&P afterhours is slowly turning into a viable environment for day trading. This article gives you some ideas to further the research on your own.