Is The S&P 500 Opening Price Important For The Day`s Price Action?

Ever wonder what the direction of the market at the open means for the rest of the day? On days when the market opens up, does it usually continue higher or go lower? Using the S&P 500 tracking SPY ETF, we went back to 1993 (when SPY began trading) to see what the historical trend has been.

In the chart below, we highlight the number of days over the last 50 days that the SPY ETF opened in one direction and then went in the other direction from the open to the close. This criteria is met if the ETF opens up and then goes down from the open to the close or opens down and then goes up from the open to the close. Historically, the average reading over a 50-day period is just over 25. This means that half the time the market continues in the direction of the pre-market futures during regular trading hours, and half the time it goes the other direction. There are definitely 50-day time periods where the market is continuing in the direction of the pre-market futures more often than not, and there are also periods where it reverses more often than not, but the long-term average is just about 50/50. This shows how difficult it is to pick the direction the market will take on a day-to-day basis.

And if the market seems like it's been pretty difficult lately, you're right. Over the last 50 days, the SPY has gone in the opposite direction of where it opened 26 times and in the same direction 24 times. When the reading is right around 50/50 like it is now, the market is giving investors fits.

in B.I.G.

Related ETFs: SPDR S&P 500 ETF (SPY), ProShares UltraShort S&P500 (ETF) (SDS), SPDR Dow Jones Industrial Average ETF (DIA), iShares Russell 2000 Index (ETF) (IWM)