An original post-crisis stock market trend is reversed: Morning Brief

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In the coronavirus market, it looks like the high and the low are on the rise.

As we noted yesterday, Wall Street analysts’ profit forecasts have gone from almost the most uniform ever recorded to the most disparate. “Data-reactid =” 20 “> As we noted yesterday, Wall Street analysts’ profit forecasts have gone from almost the most uniform on record to the most disparate.

historically stable in the face of the deepest recession on record. “Data-reactid =” 21 “> The economy has moved from a historically stable situation to the deepest recession on record.

And even a quirk often overlooked in daily market action has completely reversed the pattern that has endured for most of the past 30 years.

note to clients over the weekend, custom investment group analysts observed that the open market buying in the SPY ETF (SPY) following the S & amp; P 500 and selling the closeout would actually have seen investors gaining around 6% since the start of the year (until Friday close). Buying the fence and selling the opening, on the other hand, would see an investor down more than 28%. “Data-reactid =” 23 “> In a note to clients this weekend, analysts at Bespoke Investment Group observed that buying the open market in the SPY ETF (SPY) which follows the S&P 500 and selling the closing would have in fact, investors have gained about 6% since the start of the year (until Friday’s close). The buying of the closing and the selling of the opening, on the other hand, investor down more than 28%.

During regular trading hours, the S&P 500 has actually increased so far this year. It was the overnight session that really crushed investors during the liquidation of the coronavirus. (Source: Custom investment group)

At first glance, this may seem somewhat trivial. Many people who follow the markets closely will remember the headlines of the “overnight spread” that seemed to come almost daily in mid-March.

And so it may not be a big surprise that the data confirms that most of the pain in this market is inflicted by overnight futures trading and the resulting spreads at the opening of tomorrow . This is what this period looked like.

“If we go back to 1993, when SPY started trading, we find that all of SPY’s earnings during that period came out of normal trading hours,” writes Bespoke.

“In other words, if you bought SPY at the close every trading day and sold it at the opening the next day, you would currently be up 500%. If you did the opposite and bought SPY at the opening every trading day and sold at the close, you would actually lose 6.8%. “

has been known for years. This is part of what informs the old market adage that stupid money sells open and smart money buys the fence. “Data-reactid =” 49 “> Spreads overnight have long been the friend of an investor. The return has been known for years and is part of the old market saying that stupid money sells open and smart money buys close.

consensus views of all kinds are under pressure in this environment. “Data-reactid =” 50 “> And that this business is not only do not works but in fact underperforms both the opposite strategy and the wider market shows how pressured consensus views of all kinds are in this environment.

After a big rally in the last days of March, it looked like stocks would eventually re-test their March 23 lows. And maybe they will. But compared to its recent low, the S&P 500 has increased by more than 20%.

Thinking of another old market cliché that seems relevant right now – the market’s goal is to inflict as much suffering on as many people as possible.

Myles Udland, reporter and co-presenter of & nbsp;The final round. Follow him on & nbsp;@MylesUdland“Data-reactid =” 53 “>By Myles Udland, reporter and co-presenter of The final round. Follow him on @MylesUdland

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