The Stock Market’s Biggest Gains Always Happen at the Same Time Each Day
For more than 20 years, the stock market has made its most significant gains at the same time: overnight.
After-hours trading for the S&P 500 has generated almost 600% while intraday gains are flat since 1993.
The phenomenon has been even more pronounced since the great March 2020 selloff.
Timing is everything in the stock market. Buying at the wrong moment is the difference between making money and getting burned.
So, what if you knew exactly when all the biggest gains happened almost every single day?
Well, we can’t be that exact. But this chart, shared by researcher Rich Kleinbauer on Twitter, gets us pretty close. It turns out, all the biggest gains in the U.S. market happen at the same time: overnight.
For almost 20 years, the stock market has returned a big fat zero during daytime hours.
Third, we live in a global world where Asian and European traders have access to U.S. futures markets overnight.
Fourth, and maybe most controversial, is that central banks use the overnight markets to inject liquidity. The Federal Reserve, for example, just opened up a $60 billion swap facility in Singapore to provide dollar liquidity in Asia. The Fed has other partnerships across Europe and Asia, which keep liquidity flowing overnight.
Stock markets are eerily predictable, sometimes…
If you track market movements long enough, you begin to see some patterns. The after-hours action is just one of them.
If you were just to buy the last half-hour of each day, you’d be down 2 percent [even in a bull market]
Mark Yusko, founder of Morgan Creek Capital Management, regularly points out a few more odd timing patterns.
In sum, retail traders often flood the market at the open, sending volume into a frenzy. President Trump’s plunge protection team often operate over lunchtime during thin volume in a bid to push markets up again.
And companies typically buy back their own stocks just before 3 p.m. (they have a deadline starting at 3.30 p.m.). ‘Smart money’ players, like hedge funds, often wind up the day with a big buying or selling spree.
Maybe the stock market isn’t so unpredictable after all?