The Rally Was Already Over by the Open
After Friday’s selloff the market spent the overnight session clawing back gains. Yet once Regular Trading Hours (RTH) opened, the advance became noticeably capped.
This highlights one of the most important differences between overnight trading and the more liquid RTH session.
Overnight markets often exhibit wider ranges because less liquidity allows price to travel further with less resistance.
During RTH, deeper liquidity creates a stronger pull toward equilibrium, dampening the magnitude of directional moves.
Liquidity is, in many ways, the price we pay for stability.
As a result, the biggest beneficiaries of today’s higher prices were not the traders chasing strength this morning.
They were the participants who were already buying into Friday’s move and carried that exposure forward.
This is also why I was among the most active I’ve been in quite some time on Friday. When the market offers an opportunity to establish position before the liquidity returns and equilibrium reasserts itself, execution matters more than prediction.
By the time everyone agrees the market is higher, much of the move has already been distributed to those willing to act when uncertainty was greatest..