There is a pattern in the overnight S&P500 E-mini that is occurring more frequently so in this article I am going to describe it. Back when gold was a bull market, the gold price would rally during the overnight session because the bull market was being driven by trading activity in China. Now the Chinese stock market is causing a similar effect in the overnight S&P500 E-mini. There is recurring pattern of a rally sometime between 1:00 AM ET and 4:00 AM ET. This rally is being influenced by the movements on the Shanghai stock exchange. There is a simple 12 hour difference between Shanghai and New York. The Shanghai stock exchange has two trading sessions, which run for two hours each. The one in the morning from 9:30 AM to 11:30 AM Shanghai time. This is 9:30 PM to 11:30 PM New York time. The second trading session runs from 1:00 PM to 3:00 PM Shanghai time, which is 1:00 AM to 3:00 AM New York Time. This second Shanghai trading session from 1:00 AM to 3:00 AM New York time is the cause of the overnight rally pattern that I am now seeing on a regular basis.
The MarketWarrior 5 software can make an automatic forecast for the S&P500 E-mini. The forecast can be made for the 5 minute chart and includes a forecast for the overnight session not just the main trading session. The chart below shows a forecast for the overnight trading session on the E-mini for June 17, 2015. The forecast was calculated on June 17, 2015 at 1:33 AM ET. On the chart below, I have drawn a red box to highlight the forecast rally. This forecast rally runs from 1:50 AM ET to 3:40 AM ET. This corresponds to the second trading session on the Shanghai stock exchange. The second chart shows what happened during this forecast rally time period.
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The chart below now shows the S&P500 E-mini through 8:15 AM ET. I have manually added the red box to highlight the forecast rally time period. I also added the extra triangle markers above and below the red box so you can see the start and end of the forecast rally. The forecast rally ran from 1:50 AM ET to 3:40 AM ET. The actual market rally ran from approximately 1:10 AM ET to 4:40 AM ET. The forecast covered the majority of this rally and was right in the middle of the actual rally time period. Up until recently main land China used the financial center in Hong Kong. This is now changing. As main land China becomes a larger financial center, the overnight trading session in the E-mini is going to become increasingly active for US traders.
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