This is the first time that I am really noticing this phenomenon, and I have never really heard of it mentioned before in the equity markets. But I have seen this phenomenon in the Gold market before, but sort of dismissed it as a quirk of the Gold settlement time being at 12:15 pm CT. But, for now, let's deal with the equity market. Below, let's look at this daily chart of the ES futures. As you can see, the latest bar shows a distinct price gap between the prior close and Friday's open. Even Friday's highest price did not close the apparent gap.
|ES Futures - 1 Day - Price Gap ?|
But, yet, I distinctly remembered monitoring the overnight 15-minute session and noticing no gap in the futures prices resembling the gap shown in the chart above. In fact, here is the ES 15-minute chart from Thursday into Friday.
As you can see from noon Thursday afternoon into Friday morning there is a continuous stream of prices lower - with no gaps. What is creating this 'false gap' is merely the time chosen for the 'closing price' by the CME at 16:00 (ET), and the next day's 'opening price' at 18:00 (ET) the same evening.
So, as prices do trade from the cash close to the beginning of the fifteen minute 'pause period" from 16:00-16:15, and then don't trade from 16:15 - 16:30, for the pause period, and then do trade again from 16:30 - 17:00 (ET), and then don't trade again through the maintenance period of 17:00 - 18:00 (ET), it creates the appearance of a gap on the chart when there is really none!
Again, I had noticed this phenomenon with Gold before - primarily because of the wacky settlement time of 12:15 CT. But I had never seen a false gap created before in equity futures, nor had I heard anyone mention it, so, since I could now demonstrate it, I thought I would bring it to your attention.
And, I have a very big question. Because of the difference in volume during the 'false gap' does it send a wink, wink, signal to the Smart Money computers to try to fill that gap, too? That is a question. We'll see if it gets answered. This is the third post this weekend, and if you have not seen the other two, yet, you may wish to view them now.
Have an excellent start to the evening.