US & Europe Overnight Leads

[suprsnipes]

How much weight do traders put on the overnight movements in the US and or Europe.

When reviewing these movements in the morning what should novice traders look for and how these may effect the Asian markets.

For example last night the SPX500 went up 0.62% yet we finished the day down almost as many points the opposite direction on an index half the value.

How do traders prepare themselves for this?

Another comment I would like to make is the difference in the peak of the US and Aussie markets and how far each of them has retraced from their highs. Is it right that we have fallen approx. 10% further. Why would this be the case?

Plus to all you technical traders out there at what point would we be looking at the least at a short term rebound and to what level would the XJO index likely move too before another leg down...

 

[Trembling Hand]

If you look at one incident from time to time you will turn you head inside out. But if you follow the index moves day in day out they start to make sense.

If you look back a day the Oz market opened down yesterday on the overnight lead and ran higher from the open to the close. Last nights US gains were baked in yesterday arvo (believe it or not). On todays open a fade to close any gap was a high probability. Throw in a bit more of a push from the shorts and more crappy bank news (BNB) and you have a nice opportunity to take money of the lambs that trade on last nights news.

 

[Aussiest]

If you look at one incident from time to time you will turn you head inside out. But if you follow the index moves day in day out they start to make sense.

If you look back a day the Oz market opened down yesterday on the overnight lead and ran higher from the open to the close. Last nights US gains were baked in yesterday arvo (believe it or not). On todays open a fade to close any gap was a high probability. Throw in a bit more of a push from the shorts and more crappy bank news (BNB) and you have a nice opportunity to take money of the lambs that trade on last nights news.

I'm not really sure what you mean? Lol.

What is 'fading the gap'?

What is the 'push from the shorts'?

Why doesn't last night's lead from Wall St. influence our market? Is it because we're almost a day ahead of the U.S. anyway?

 

[Porper]

If you look at one incident from time to time you will turn you head inside out. But if you follow the index moves day in day out they start to make sense.

If you look back a day the Oz market opened down yesterday on the overnight lead and ran higher from the open to the close. Last nights US gains were baked in yesterday arvo (believe it or not). On todays open a fade to close any gap was a high probability. Throw in a bit more of a push from the shorts and more crappy bank news (BNB) and you have a nice opportunity to take money of the lambs that trade on last nights news.

Have to agree, if you buy when wall st is up and sell when it is down you will be less successful (there have been various studies and back testing posted re- this.)

Not that I am a day trader but generally you will find that the Aus market pre -empts the US fairly well, hence we often go down after a positive finish on wall st.

If you are not day trading just look at the larger time frame patterns.

 

[Trembling Hand]

What is 'fading the gap'?

What is the 'push from the shorts'?

Why doesn't last night's lead from Wall St. influence our market? Is it because we're almost a day ahead of the U.S. anyway?

A pic is worth......

 

[korrupt_1]

I'm not really sure what you mean? Lol.

Don't worry... sometimes i'm not sure what TH means either... but most of the time it's worth the effort to try to understand what he is on about ;-)

What is 'fading the gap'?

Gap = Today's open - Yesterday's close

If Gap is +ve, market will want to go down
If Gap is -ve, market will want to go up

What is the 'push from the shorts'?

Means prices hit a major resistance level and short sellers hit the markets - ie more than normal number of sellers in the system.

Why doesn't last night's lead from Wall St. influence our market? Is it because we're almost a day ahead of the U.S. anyway?

When I was share trader, I struggled really hard with this... when I became an index trader, it all made sense...

Basically, the market is a 24hr system comprised of mainly 3 zones. Asian, Europeans and the US.

Depending on which market is open, the other 2 will follow. So, when US makes a move, the overnight AU Futures Index has already followed the move. Since the futures is more or less the combined ASX200 stocks, then when the AU market opens the next morning, stock prices will have already reflected the good/bad news. Hence there's the gap in stock prices after the market reopens the next day.

Professional traders will know there will be plenty of liquidity in the system and take positions in the opposite direction of where they expect the majority of 'mum and dad' traders will take. This allows them to move large volume around without affecting the market too much. Smart traders will know this and trade in the same direction of the Pros. The general affect it has is a pullback (if US rallied overnight) or a rebound (if US tanked) from the opening stock price.

 

[skyQuake]

Agree with korrupt, most of it is already factored in before open, but night SPI is just a bad liquidity proxy following the S&P500.
Our trading day then begins and stuff moves around cause we have BHP, RIO and WPL - Resources and Energies help shape our index a lot, and then theres AUD movements...
Also, as we are such a 'small' market compared to the US, our day is sometimes a gamble on what the US will do overnight, so thus the 'we are a day ahead' school of thought.
Lots of aussie ADRs trade in the US overnight, and they can give you a good idea of whats gonna happen.