For the most part, the historical analyses I post to the blog are ones lasting one to several days. To support my trading, however, I also rely on large numbers of intraday analyses. In the coming days, I will post several intraday market results to provide examples of the kinds of insights we can gain with short-term data.
For this analysis, we're using 5 minute data with the ES futures, and we're going back to January 3, 2005 (N = 314 trading days).
I'm looking at the range of the first 45 minutes of trading (9:30 AM - 10:15 AM EST) and how that is related to the range for the remainder of the morning (10:15 AM - 12:00 Noon). In other words, does a narrow range in the first 45 minutes predict a narrow range for the rest of the morning? This would be helpful for traders to know with respect to profit targets--and the gauging of likely opportunity.
When the high-low range of the first 45 minutes is .40% or greater (N = 101), the range for the remainder of the morning averages .51%. When the range for the first 45 minutes is .25% or less (N = 66), the range for the rest of the morning averages .37%.
Here's a different way of looking at it:
When the range of the first 45 minutes is wide, about 44% of the time we'll see a range for the rest of the morning that exceeds .50%. When the range of the first 45 minutes is narrow, we will see a rest-of-morning range in excess of .50% only about 14% of the time.
Why do we see this relationship? When the range of the first 45 minutes is wide, the average five-minute volume for the *entire* morning averages 13,672. When the range of the first 45 minutes is narrow, the average five-minute volume from open to noon averages 8957. A narrow early period in the market is telling us about *who* is in the marketplace and *how much* business they're doing.