In the last post, we saw that the strategy of closing positions out at the end of the day takes traders out of the most bullish portion of market action.
But how much price action can be expected during the day session, from open to close? Since March, 2003 (N = 834 trading days), we had 477 days in SPY--almost 60%--in which the market closed within a .50% band around its open. Only 135 day sessions (a little over 15%) saw a gain of over 1% from open to close or a loss of greater than 1%. Surprisingly, about 40% of all day sessions closed within a band of .30% around the open.
The average high-low range since March, 2003 has been 1.07%--and yet only a little more than 15% of all days closed with a day session price change of more than 1%. What that tells us is how few of those days were directional, trend days. While the average trading day may give us approximately 1% of range, the average open-to-close change is far smaller than that. Indeed, about 40% of the time, the day's price change has been less than four points in either direction.
