What pre-market factors would be most predictive of the day's high/low range? Overnight trading range?
stocks?indices?forex?wheater? a good approximation: atr(n) n fixed or inversely proportional to volatility
You can't automate this for the S&P to predict range (as in the high and low) for the next trading day range with any accuracy because there's just too many variables involved due to the fact that the S&P is a trading instrument of global porportion. Simply, the S&P is too interconnected with the world financial markets. Just as important, it's too interconnected to global events not related to the financial markets... In that any prediction model will be useless for real trading purposes. The best you can do with all those variables interacting with each other is to predict if the next trading day is most likely to trend or range. Knowing when trend days are most likely to occur without trying to pinpoint any high or low can be useful for a trader to determine when to use a trend strategy or range bound strategy. Mark
Originally I thought that the overnight trading range of the SP could be used to approximate the RTH range, but there seems to be little correlation. It does seem that when we get a large opening gap, either positive or negative (greater than 10pts) we end up with a trend day. Any thoughts on that?
Mark nailed it. You are looking for something that is disappearing into the past. I would add that as time moves on the RTH hours are blurring into the overnight. Its tending to a 24 hour day. 7/2 is a good example. The unemployment hit @8:30 EDT and the RTH just followed suit. I bet someday the morning gap trade will have disappeared as the S&P pit disappeared.
Tony Crabel's stretch indicator can give you an idea where the high or the low of the day would be. Also time can give you more confirmation of a turning point. And as last the direction of the daily trend gives you a clue of turningpoints... Example: This Open + or - stretch of the past ten day's. 50 + 2 = 52 high point. 50 - 2 = 48 low point of the day. When the instrument is trading in a down trend in a daily graph then it is likely to turn around when it hits 52, more so if it is happening between 10 and 10.30 AM. Then you have 'catched' the high of the day... Vice versa for catching the low of the day...
Enclosed is a chart showing the Stretch High and Stretch Low points for the ES, for the last 10 days. It's usefull for determining what the potential Highs/Lows can be and/or to see if a point has been hit or not. But when I was putting the chart together I went back and reviewed my trades for the same time period and I asked myself if knowing these Stretch High and Stretch Low points would have affected my trading and the answer was ... NO! Good trading P.S. They are like "Gaps" for traders who trade them and believe they have to be filled.