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.
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| 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.
TraderJoe
Hi TJ, long-time follower here. Appreciate your work, and am learning a lot. If I'm understanding correctly, the 15-minute pause in /ES futures from 4:15 pm to 4:30 pm was abolished a few weeks ago. In addition, I have found those "futures gaps" to which you speak get filled over 95% of the time (including those that happen from 5pm to 6pm re-open). The most recent ones are sitting at 4359.25, 4389.50, and 4411-ish.
ReplyDeleteIf I am misunderstanding, please delete this post.
Hi - you are entirely correct that the 'pause' was eliminated. I missed it and got no notice from the broker. Here is the announcement from the CME website.
DeleteElimination of CME Equity Futures and Options Market Pause
Effective this Sunday, June 27 (trade date Monday, June 28), CME Group will eliminate the 15 minute market pause from 3:15-3:30 with Security Status (tag 35-Msg-Type=f) message where tag 326-SecurityTradingStatus=21 (Pre-Open) for these CME Equity Index futures and options.
With this change, the affected equity futures and options products will trade from Sunday-Friday, 5pm-4pm CT, daily, with a 4pm-5pm CT maintenance period.
LINK: https://www.cmegroup.com/notices/electronic-trading/2021/06/20210621.html#ecefo
Scroll down as needed.
TJ
It is 'interesting' how the false gap was filled tonight.
ReplyDeletehttps://www.tradingview.com/x/DgosEiNC/
TJ
Good morning all. SPY 30-min: so far we are playing 'open a gap to close a gap'. This morning is the 'first of the month money' and prices while higher, appear to be struggling. This 'may' be a triangle. But it could be more.
ReplyDeletehttps://www.tradingview.com/x/TzlJ9UsQ/
Triangle trend lines are tentative until something makes sense.
TJ
P.S. futures have several downward overlaps.
DeleteSPY 30-min; now down into gap area and contact with EMA-34.
ReplyDeletehttps://www.tradingview.com/x/OFclB5AN/
TJ
ES & SPY gone red; all overnight gains given up. Oil down $3/bbl. A triangle count is in black. The 'c' wave down count of a larger (b) wave down is in red.
Deletehttps://www.tradingview.com/x/vmKisc2z/
To activate the red count there would need to be a lower low.
TJ
Hi Joe,
ReplyDeleteES does not take a break in trading from 15:15 to 15:30 anymore. The only break now is from 16:00 to 17:00 CT. So the close for day's trading is 16:00 CT. And of course all trading starting at 17:00 is going to be included in the next day settle.
Simon
Correct .. see the first comment above & thx!
DeleteTJ
SPY 30-min: the smaller triangle has invalidated.
ReplyDeletehttps://www.tradingview.com/x/Zl1CwkvK/
TJ