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Market Follow Through on the Close in 3 Mins or Less

Aug 31, 2015

Hey everybody, James here from the tastylive Research Team.

There’s a belief out there that if the market closes on it’s high print or low print, this gives an indication of what the market is likely to do the following day. We’re believers in market randomness, so we were curious to see if there was any validity to this theory.

To study this potential phenomenon we took daily S&P 500 data going all the way back to 1990. We broke down the data and subdivided the daily moves by half % increments. First we looked at all daily moves and found that approximately 53% of the days in the study, the S&P 500 moved up.

Next we looked only at daily moves when the market closed the previous day on the low print. We found that in this dataset, the following day saw a positive move 59.5% of the time.

When the market closed on its highs the following movement was closer to being evenly split, with up days occurring 49.5% of the time.

Bottom line: we found no significant variation in the magnitude of the directional moves around days where the S&P 500 closed on either its highs or lows.

If you want more detail on this study, click here! Feel free to search for other topics you’re curious about, too! The show archives are an amazing repository of research.

OK, I’m James Blakeway. For the rest of the research team, thanks for watching Market Measures Notebook!

This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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