SPY Opening Range Volume Vs Days Range

[darthtrader 10]

Dr. Brett had an interesting post tonight and I was reading on some of his ideas as far as anticipation of the days volatility.

I tried to go through tonight and compare the first half hour volume on SPY to the days range.

I'm still kind of dumb with stats but it yields a correlation of 0.42554671

testing from the start of the year until today. I'm not sure i'm reading this scatter plot correctly(i normalized spy range for another chart) but I think it looks pretty interesting. Basically, that if you have small volume in the first half hour(average volume range over the period was around 3 million) there is a good chance we will have a somewhat narrow range day and it probly makes sense to be looking to fade ranges. On a high volume day in the opening range you get virtually all the big range days but far more unpredictable as far as the range being small or large.

Might be a good bias to try out as far as fading vs looking for the breakout.

 

Dr Brett made an interesting market profile point that larger than normal volume at the open probly points to other time frame participation.

 

I would like to try to add the VIX into this. For you guys with stat knowledge would a multiple regression be the thing to learn for doing this with 3 different sets of data?

[brownsfan019 17]

darth - very interesting indeed. I am going to look into this more myself. We'll see if we can't find something useful to work with here.

 

Some of the posts being referenced at TraderFeed are:

 

http://traderfeed.blogspot.com/2007/07/anticipating-volatility-in-stock-market.html

http://traderfeed.blogspot.com/2008/04/sector-correlations-as-decision-support.html

[brownsfan019 17]

darth - good stuff on Brett's blog about this topic.

 

I have entered number crunching mode and will let you know what I find.

 

For me, the value is using the first 15-30 minutes to gauge the odds of a trend vs. range day. Actually, that would be basically my version of the holy grail.

 

It won't be perfect and I'm sure most here understand that, but if a simple analysis can provide an idea of the likelihood of the following movements, that's great!

 

I would suggest anyone looking to improve on their trading to take the time to read Brett's blog.

[darthtrader 10]

hey brownsfan, I think the ultimate for this stuff would be able to do it on a basket of actual stocks. That might be a little harder on S&P but for using it against on YM that really shouldn't be much of an issue. I wouldn't doubt alot of what would mess things up with SPY is how much volume is arbitrage against the underlieing.

today he has a cool post too that would make an interesting indicator.

http://traderfeed.blogspot.com/2008/04/volume-in-stock-index-futures-market_17.html

 

Plot the volume and range on a 15 minute chart, then take some kind of moving window to get an average 15 minute volume to guage if we are above or below "normal" volume.