A Primer To Intraday Market Moves

Tyler Durden's picture

While we have looked in the past at the incredible dominance of FOMC days when it comes to stock market performance, recent intraday performance of the major equity indices has had a somewhat repetitive and rhythmic structure. We know volumes surge, pause, and surge; Tradestation has dug one step deeper into the actual performance structure intraday and found some fascinating trends. From the extremely clear final-hour ramp to the oscillating bull-bear opening moves (and the European close positive bias) across almost 30 years of price behavior in bull and bear markets. The afternoons dominate market performance in bull markets and the morning session dominates the weakness in bear markets - so fade the opening rally, buy the dip, cover half into Europe, hope into the close appears the 'empirical route of least resistance' - for now.



Active traders make their livelihood in the charts of the intraday session, scanning the markets for recognizable patterns that are persistent and profitable over time. However, the intraday session is influenced by numerous factors. For example, trading activity has been known to increase prior to and after economic and earnings announcements. Developments in technical analysis can also influence price momentum, market swings and trend continuation. And then, of course, there’s always the completely unforeseen event that throws the market completely out of whack. While a certain degree of price movement will always be random, these and countless other factors come together to create observable trading biases. In this note below, the author will focus on trends and reversal points in the intraday session, with the goal of identifying bullish and bearish biases that active traders can put to use in their trading.

Intraday Bias Studies

In this section of the paper, intraday price trends of the S&P 500 Index are spotlighted using data as far back as 1987. Some of this information was conveyed in the March 8, 2011 Analysis Concepts paper, “Mapping the Intraday Price Movement in the S&P 500 Index” (http://www.tradestation.com/education/labs/analysis-concepts/mapping-int...). In this paper, a similar study is constructed from a finer interval resolution (60 minute increments) with a variation in the construction of return calculations. Another difference is that basic plus (+) and minus (-) signs are used to depict whether the hour was positive or negative in percentage terms. This creates a clearer visual representation of the hourly trends that makes them easier to identify. All results are created from average returns; these average returns are calculated on an hourly interval but are generated from 30-minute bars between 10 a.m. and 4 p.m., which includes pre- and post-market trading (price changes from the 4 p.m. bar to the 10 a.m. bar).

At first glance in Table 2 (below), what stands out is the number of positive periods at the 10 o’clock hour and in the 4 p.m. hour, with the bulk of the returns from the 10 a.m. hour coming from the pre-market session. The actual return from 9:30 a.m. to 10 a.m. is positive, though Table 2 also shows a bullish bias in the 4 p.m. hour as stocks make their way to the close. Going back to 1987, 21 of 25 occurrences had average returns that were positive for the 4 p.m. interval. Also of interest is the weakness that typically occurs in the 11 a.m. hour (10 a.m. to 11 a.m.). Again, for data going back to 1987, there were 18 occurrences where returns were negative for this interval. The market seems, on average, to take a breather in the 11 a.m. hour after its initial morning run-up. Another interesting statistic is that if stocks close higher on average into the 3 p.m. hour, their probability of moving higher into the 4 p.m. close is 70%.

Next, going back to September 11, 1984, trading biases in the S&P 500 Index intraday session are analyzed during longer-term bullish and bearish market cycles. As mentioned earlier, what really stands out in the data is a positive bias in the 4 p.m. hour of each bullish and bearish market cycle. Also, notice the positive and negative biases in the 10 a.m. hour, correlated to each bull and bear market cycle. Additionally, note that three of four bear market cycles had a negative bias on average from the 10 a.m. hour into the 2 p.m. hour.


Bull and Bear Market Intraday Return Relationships

Depending on how one categorizes them, the markets can experience cyclical periods of bull and bear runs for various lengths of time. A more traditional approach is to classify these events in percentage terms. Therefore, the rule applied here states that if the market advances or declines by more than 20 percent, this will constitute a bull or bear move. Price movement of this magnitude is recognized by many financial market professionals as a change in market cycle.


Figure 7 (above) represents the compounded total return of the S&P 500 Index for the first, second, and third periods (9:30 to 11:40, 11:40 to 1:50, and 1:50 to 4:00) of the trading session within each successive bull and bear market from 9/1/1983 to the present time. In analyzing the data, the information is evident. First, the 9/1/1983 to 8/21/1987 and 12/4/1987 to 3/24/2000 bull markets, which occurred in the first two decades of the data, had most of their returns formulated from the last third of the trading session (1:50 to 4:00). At the same time, the 10/4/2002 to 10/12/2007 bull market, along with the current one, have had greater returns occur in the first third of the day's session (9:30 to 11:40).

In Figure 8 (above), we can see that in bull markets, the positive returns that the market experiences on average come from all three periods of the intraday session. However, the returns are highest in the first (24.33 percent) and third (74.52 percent) periods, with the second period still being positive at 14.44 percent. We should point out the return impact of the 268.84 percent in the third period of the 12/4/1987 to 3/24/2000 bull market. Even if we cut this number down by some factor, the returns are still significant for this period.

As we look at the sequence of returns in bear markets, they are also very interesting. They typically start with painful selling in the first third of trading, as Figure 9 (above) illustrates. The average bear market return shows that from the 9:30 to 11:40 period, the return was -29.69 percent. In bear market cycles, however, the market selling becomes less pronounced as the day progresses. The second period of trading returned -9.60 percent on average, while the third period returned -1.07 percent on average.  


So in bear market cycles, there seems to be some good opportunity to either short early in the first third of the trading session or buy on weakness somewhere in the last third of the session.  


Source: Tradestation Labs Analysis Concepts

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
booboo's picture

So it's Fade, Trade, Raid and Run or is it Raid, Run, Trade and Fade?

Goddamn I hate getting old.

HedgeAccordingly's picture

u can win by tape reading each session .. but overnight trading def has more of a defined trend. 


roadsnbridges's picture

Where are the hot chicks?  You go gay?

I relied on you to point the way to things to download and view between market tramps.

(Crap, Freudian slip.)

El Hosel's picture

  Great, now we know how to play a bull market and a bear market.

          .....  What about a rigged  bear market?

DeadFred's picture

I find it hard to believe that pre-algo data has much relevance. I'll also bet the post algo data differs significantly with each new trading program that get introduced. All computer systems will have expoitable glitches if you can identify them, but how long will they last?

DavidC's picture

I'd phrase it slightly differently - I find it hard to believe that algo data has much relevance!


Tippoo Sultan's picture

Algos ( or is it "algoes ?" ) regardless, I, too, have noticed a particular weakness in several of my higher-liquidity names, going into the 11:00 AM EST hour, punctuated by a significant drop at roughly 11:30. Due to the nature of these stocks ( broadly-owned/high-liquidity ), I have come to attribute this peculiar yet frequent ante meridiem dip to the European close: entities who either run their own algos, programmed to sell by [ their ] close, or those who do not wish to be exposed to any "U.S." intraday market/headline risk.

buzzsaw99's picture

the only pattern that holds is that of bonus maximus. the machines are programmed that way.

Dr. Engali's picture

So what you are saying is BTFD?

adr's picture

Am I supposed to be the 128 millisecond dip or the 596 millisecond dip?

Hype Alert's picture

With the rise in volume of computerized trading and it's dominance in the market, data prior to 2012 is probably worthless.  In fact, one has to wonder why this information was even released.

Meesohaawnee's picture

as i told all july. dont get your panties ruffled on the jobs report. Its gonna be what they  wanted it to regardless. That being said the end was determined at 6am ct or before. You dont get green like that unless its pre programmed.

adr's picture

The chart says the only negative time since 2009 is 12:00. I guess that means day traders don't want to hold stocks over lunch time.

The other bull markets only had 4 pluses, this one's got 6. I guess that makes it king bull.


But being king of a steaming pile of shit, is being king of a steaming pile of shit.

booboo's picture

Yes sir, and one thing about the rat race is that even if you win you're stll a rat.

Godisanhftbot's picture

 That's right, it means buy and hold is back.

Mercury's picture

Interesting but some of this veers into instant football stats territory:

And that was the shortest punt return in a post-season game with the opposing team down by at leat 5 on an overcast day...

I wonder if the data from the pre-algo days is even relevant anymore...


Meesohaawnee's picture

that sounds like chicago sports radio. The pain of hearing when brian urlacher took a shit when it was 80 degrees plus is unbearable. No pun

Godisanhftbot's picture

 Better yet, that was the fastest race race ever by a horse with one undistended testicle wearing a bar shoe and a jockey with one eye.

roadsnbridges's picture

Crap, does this mean I have to change strategy, or has it been common knowledge for so long that I'm good?

disabledvet's picture

this is truly great info. i'm not trader...never will be...and therefore leave the "analysis" to the "perfect" trader Jimmy Cramer who made a living doing this. My take is pretty straightforward however: you have to make the most fundamental choice right from the get-go and go from there otherwise "you're dead no matter what." That choice is brutally simple: "is this a bull or bear market?" If you cannot make this choice immediately and stay with it...you'll never have the discipline to know "i'm phucked, i need to lick my wounds and go back to pumping gas and driving a taxi" which is what most traders do anyways. If you do NOT make this choice "you'll find yourself in the Las Vegas desert with a bunch a fellas who..." well, you get the idea. Anywho i've been bullish from the get-go of the collapse and i read this article and i say two things: first, this is a CLASSIC raging bull market. second, i'm glad i'm not a trader trying to trade it as such. Jimmy says "after three stop trading!" great advice. if you'd listened, you'd be out ALL the gains of this "stealth rager of a bull." BEYOND frustrating! not only that but what's moving? UTILITIES??? good luck with that one! if you're an...ahem..."operator"...you're going coo-coo for co co puffs over Social Media...AND ARE NOW DEAD. YIKES! I've used Wisconsin Energy as my starting point (three years ago) mainly because i was scared shitless and figured "if the State Utility of Wisconsin failed it really was the end." But it also made a great entry point into the likes of "horribly run companies like General Electric" (of which i own) and hopefully other utilities interested in emulating the natural gas play. when the price of natural gas collapsed IN SPITE OF Fukushima i couldn't believe just how amazing such a circumstance this could be. Hence "i'm all buy and hold and index funds" because "who the phuck can make sense of 2 buck nat gas in the USA when in Japan and Europe it costs 12"!!! NOT ME! Anywho i've simply followed the thesis ever since. Logically "aerospace and chemicals come next"...hence broadening the industrial recovery while adding an "value added kicker with monopolistic leanings"! throw in a Fed that can peg rates at or near zero with impunity even tho the USA is running trillion dollar deficits PLUS wars without a clue nor even an interest it would seem in winning and i was like..."man, that's a lot of government dough getting put to work without a SHRED of oversight as to the legality!" start barking wildly as such and, amazingly GOING ON THREE YEARS! on Zero Hedge and BAM! Off to the races! I highly doubt anyone has been actually trading this stuff i write (i'm just an index fund guy--although i sure know a GREAT active manager if any of you are in the market for one!) but i am amazed at how well you'd be doing right now...with a LOT more to run going forward through to election day and beyond! "Balls of steel" if you did boys and girls! Still...last friday was to me a TEXTBOOK bear filled with fear short covering rally...followed by a "skewered bear" Monday..."ho-hummer." Tuesday...today was a "slow dagger through the heart" day with our now hapless bear lost in amazement as he is brutally extinquished by the sheer mass of "The Stronger." Tomorrow? We shall see...i'm sensing some wispy this time...a "breezy day of the market just drifting higher for no phucking reason and on no phucking news either." CLASSIC bull market. "Whispering Death" day i will call it should it go down like that.http://www.youtube.com/watch?v=1rGcn2XGr48&feature=related

roadsnbridges's picture

Much easier to flip the coin at 3:59 pm EST.  Heads, I short.  Tails, I motor off to the meat market to get sum.

It was heads today.

DeadFred's picture

Your coin must have seen how overbought this rally is getting.

Meesohaawnee's picture

interesting! But i beg to question the word Classic.  like the poster above said and ill paraphrase. Dont confuse a classic rigged bear market with a classic bull market. Doesnt Classic assume, been around?

Caviar Emptor's picture

Stocks are where dead Fed money goes so that they don't get into the real economy and cause inflation. But of course that means that the Fed has put its trust in WS to handle the laundry. And you know where that goes sooner or later

dvsteenk's picture

nice analysis, but again someone trying to make sense of planned organised chaos

the rips and dumps may be more frequent in certain timeframes, but I'm convinced that they serve only one purpose: make huge profits in derivative plays

the moves in equity markets are just smokescreens

i.e. the gains are not primarily made in the (manipulated) moves of stocks and currencies but through careful bets on options, futures, ETF's - they move them in the money and beyond by pumping or dumping the underlying, in whatever direction makes sense for that

correlations last as long as they do, until they don't... fck, my model doesn't work anymore - why?

fooled by randomness.... programmed randomness

orangegeek's picture

SP500 climbs while volume declines - not a sign of strength.



Itch's picture

"the returns are highest in the first (24.33 percent) and third (74.52 percent) periods..."


Im thinking its around these times where you are less likely to be fucked around with if you just obey price, if for no other reason than the sheer amount of busines being done.