The Fed Explains Why Stocks Melt-Up In Overnight Trading

zerohedge2021-05-28

By now everyone has seen some iteration of this chart (most recently discussed here), which shows that whereas stocks are generally flat over longer periods of time during the regular "cash", or day ...

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Comments

BenjyH2O
2021-05-28
BenjyH2O
last night was a great example of this
phily
2021-05-28
phily
Absolute Bull
hello369
2021-05-28
hello369
Please like and comment
Eric_Ooi
2021-05-28
Eric_Ooi
Nah nah
happymoney
2021-05-28
happymoney
Fed up
- happymoney:
  Thanks
- phily:
  yeah
Canokira
2021-05-28
Canokira
nice
- PrimRose:
  Yeah thats nice

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The time stamps on the X axis are East Coast US time, starting at 6 pm local. As you can see, the largest returns (when the red line goes parabolic) are from 2am to 3am. During regular trading hours (930 to 1600, right side of the graph) average cumulative returns are basically flat.\nThe Fed attributes this “Drift” to US equity market makers absorbing excess supply during selloffs at discounted prices going into the 4:00 pm close, which in turn creates an artificially low S&P closing price.The chart below shows the “Overnight Drift” broken down by days with high “RSV” (Relative Signed Volume, the percent of sell imbalances) versus those with no RSV or negative RSV (lots of buy interest at the close).Sure enough, days with high levels of selling at the close have a more pronounced positive “Overnight Drift”.\nTakeaway: to the Fed’s thinking, the Overnight Drift is caused by non-US traders sniffing out artificially discounted closing S&P prices and arbitraging them away (albeit with some risk) before the next trading day in the States.As for a practical takeaway, the first chart we showed you says that on average you’re often better off selling equity positions at the open and putting in your Buy tickets in the middle of the afternoon. Market events can always subvert that approach, of course, but on average it has been a productive rule set to follow.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":135723577,"gmtCreate":1622186283999,"gmtModify":1704181097513,"author":{"id":"3563082107878036","authorId":"3563082107878036","name":"BenjyH2O","avatar":"https://static.tigerbbs.com/d55f78bf3cbc6fc87beb8156ccf54a36","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3563082107878036","authorIdStr":"3563082107878036"},"htmlText":"last night was a great example of this","listText":"last night was a great example of this","text":"last night was a great example of this","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/135723577","repostId":1135914889,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":135424545,"gmtCreate":1622178111387,"gmtModify":1704180967995,"author":{"id":"3580784569082011","authorId":"3580784569082011","name":"phily","avatar":"https://static.tigerbbs.com/aca5719ffbb6da30fa7f147236e6bec7","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3580784569082011","authorIdStr":"3580784569082011"},"htmlText":"Absolute Bull","listText":"Absolute Bull","text":"Absolute Bull","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/135424545","repostId":1135914889,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":135424254,"gmtCreate":1622178101578,"gmtModify":1704180968647,"author":{"id":"3581346389720502","authorId":"3581346389720502","name":"hello369","avatar":"https://static.tigerbbs.com/6f472aef15b4385af1feba4d7bd16e06","vip":1,"hat":"https://static.tigerbbs.com/d54f48232ec41d764838ad8d7c381060","crmLevel":1,"crmLevelSwitch":0,"idStr":"3581346389720502","authorIdStr":"3581346389720502"},"htmlText":"Please like and comment&nbsp;","listText":"Please like and comment&nbsp;","text":"Please like and 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thats nice","text":"Yeah thats nice","html":"Yeah thats nice"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":27,"commentSize":7,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1135914889"}