NEW YORK — An investor who sets an alarm for the opening bell in New York has, on a typical day, already missed about half of what the Nasdaq is going to do. The other half happened while they were asleep, in a futures market that most people never look at and that no evening bulletin reports.
Monday was the pattern in unusually clean form. The Nasdaq 100 finished Friday at 29,308.86. It opened Monday at 29,094.72, a fall of 0.73 per cent that occurred entirely overnight, before a single share changed hands in New York. Across the whole six-and-a-half-hour cash session that followed, it lost a further 0.14 per cent. Roughly five sixths of Monday’s decline was already done at the opening bell.
That is the case for watching futures. What follows is the case against reading anything into them, which Eastern Herald tested rather than assumed.
Over the 125 trading sessions from late February to Monday, we compared each overnight gap with the cash session that came after it. The correlation was 0.056. On a scale where 1.0 would mean the overnight move told you exactly what the day would do and 0 would mean it told you nothing, the answer is nothing, with a rounding error attached.
Nasdaq Futures Today: Where the Contracts Stood
Late in Monday’s New York afternoon the September Nasdaq 100 contract was trading at 29,161.50, down 0.77 per cent against the previous settlement. The Dow contract was the outlier, holding a small gain while everything with a technology weighting sat lower.
| Contract | Last | Prior settlement | Change |
|---|---|---|---|
| Nasdaq 100 (NQ) | 29,161.50 | 29,387.75 | -0.77% |
| S&P 500 (ES) | 7,674.25 | 7,691.25 | -0.22% |
| Dow (YM) | 53,493.00 | 53,353.00 | +0.26% |
| Russell 2000 (RTY) | 3,002.70 | 3,022.10 | -0.64% |
| Front-month contracts quoted intraday, not at settlement. Futures prices differ from the cash index by the cost of carry and any dividends due before expiry, so the level will not match the index exactly. | |||
What the Overnight Move Actually Predicts
We took every session from February 25 to August 24 and split each trading day into two pieces: the overnight gap, measured from the previous close to the opening level, and the cash session, measured from the open to the close. The first piece is what futures deliver. The second is what happens once New York is awake.
| Measure | Result |
|---|---|
| Correlation, overnight gap against following cash session | +0.056 |
| Average overnight gap, ignoring direction | 0.748% |
| Average cash session, ignoring direction | 0.770% |
| Days the cash session continued the overnight direction | 69 of 125 (55.2%) |
| Days the cash session reversed it | 56 of 125 (44.8%) |
| Calculated from published daily open and close levels for the Nasdaq 100. The overnight gap is the change from the prior close to the opening level; the cash session is the change from open to close. Correlation is the Pearson coefficient. This measures the index rather than the futures contract itself, but the gap between them is what the futures market prices overnight. | |
The two numbers in the middle are the ones worth keeping. The average overnight gap is 0.748 per cent and the average cash session is 0.770 per cent. They are almost the same size. The market moves as much in the seventeen and a half hours it is closed as in the six and a half it is open, and the direction of the first tells you almost nothing about the direction of the second.
Why the Overnight Session Carries So Much
The mechanism is not mysterious. Chicago Mercantile Exchange equity index futures trade almost continuously, from Sunday evening through Friday afternoon Chicago time, pausing for an hour a day, according to the exchange’s own contract specifications. Everything that happens outside New York hours therefore has somewhere to be priced: Asian and European sessions, overnight earnings releases, and anything a government announces before dawn.
American economic data is the clearest case. When the consumer price index lands at 8:30am in New York, an hour before the cash market opens, futures absorb the whole reaction. Fortune’s account of the August inflation releases described futures moving on the numbers well before the bell, and the same happened around the large retailers’ results a week later. By the time the exchange opens, the news is in the price.
Monday, and What It Fits Into
Monday’s overnight decline was a memory and semiconductor story arriving from Asia, and the cash session mostly held the level rather than extending it. Micron fell 5.5 per cent and Nvidia about 2.5, while the Dow rose. That split is the whole session: our Nasdaq 100 column found breadth almost exactly even at 51 up and 51 down, our Nasdaq Composite column found the wider index barely distinguishable from the narrower one, and the Dow and S&P 500 columns cover the rest.
What This Column Cannot Tell You Yet
We cannot tell you what the futures will do tonight, and we are not going to pretend the number above is a forecast. A 0.056 correlation is a statement about 125 past sessions and it will not stop a single overnight headline from moving the contract several hundred points.
We also cannot separate the gap into its causes. Some of the overnight move is genuine repricing on real news from Asia and Europe, and some is thin-market drift that reverses as soon as American volume arrives. Distinguishing the two would need order-book data that is not public, and without it we can only say that the overnight session is large, that it is roughly as large as the trading day, and that half the time the trading day disagrees with it.
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