How did they know?

[schoe]

I noticed last night while watching the Dow on a fifteen minute chart that the last candle before the close was a very large down candle this downward momentum carried on after the close. This suggests to me that institutions were dumping shares and knew today was going to be a large down day before it happened.
How do they know this ?? Luckily I followed my instinct and shorted it with them. It makes me think that out of hours trading (after the official close) gives a good indication as to the direction as this is when a lot of professionals will trade.
What are others views?

 

[davelong]

Hi schoe,

In an article I read a little while ago, the author wrote " it is generally accepted that amateurs dominate the open and professionals dominate the close " or words to that effect. That would certainly bear out your observations.

regards

David

 

[rossored]

Out of hours trading gives absolutely no idea as to the next days direction imo. Many times I've looked at what YM or ES futures have done overnight ( ie nothing most days ) and most times it has little or no relation to what the market does the following day.

It might gap down / up, of course, but no-one actually "knows" for sure - the gaps are normally due to economic announcements ( jobless claims, etc ) that come out at 0830 EST. In this case (today) I believe it was announcements from Amazon and the like, but as I never have and never will trade overnight, I take no notice of it all anyway :cheesy:

 

[stevet]

quite often when people are new to trading - they tend to see an an action and associate it with a reaction - but as time goes on - the same action will then appear to cause an opposite reaction - and a new action takes over to cause the original reaction - and so on -

the key is to just look at what is happening and ride that until it changes and then ride the new direction - but try not to look at anything as forecasting - as once you feel you have the ability to forecast - you will discover that in truth this ability is just forecasting that you will have a seriously depleted wallet - as you will be blind to indications that your crystal ball has got it wrong

 

[Skimbleshanks]

Yesterday's action on the futures showed a head and shoulders. In the big picture (30 min chart since 9 October), 1048 was the top of the right shoulder. This right shoulder was the last opportunity to drive the market higher, and as it couldn't it could only go down.

Towards the end of the day there was very large volume in a small whipsaw action; that was the big boys getting into position.

And today, we saw the result of all those three things coming together.

 

[Grey1]

My view is that they had no idea the market would fall 150 today ... Most these guys are less professional than most of us.. At least we put our money on line., they put some else's..

Todays fall was unknown and unknowable and only knowable going backward if you know what I mean..

Amen

 

[china white]

Skim - from my experience when I traded options on SP500 as a pro:

1) if your size is not that big, say 10 biggies and u want to position yrself say short for tomorrow's open u ask yr broker to show a clip of 2-3 above today's close, once u r filled, he shows another clip another 1.5 pts above etc. Pros usually get a better fill on the after-hours this way.

2) similarly when u get into options position during regular hours, u may want to do your delta hedge in futures in after-hours due to the same reason - better fill.

 

[Skimbleshanks]

Thanks for the info China.

I'm just used to seeing the large volume in a cluster of bars towards the end of the day, and that always seems to result in a nice move the following day. It's a pain though when you are caught in it and whipsawed around a bit.

 

[picker]

They are not daytraders that is why they, we know!!