Author reports a backtested intraday pattern where SPX tends to make outsized late-day downside moves when it stays near the open in a tight range.
Unpriced research observations (excluded from Calls and Returns):
SPX — WATCH The author observes that when SPX stays near the open and remains in a tight range into late afternoon, the market often makes outsized moves to the downside. The proposed mechanism is that lack of directional commitment earlier in the session leaves the market vulnerable to late-day Market on Close order flow. The pattern backtests back to 2016 with about 200 trades, though the author asks for further validation. Exact non-equity contract requires separate historical validation; no generic proxy.
On days where price never really escapes the open and remains in a tight range late afternoon, I’ve noticed the market sometimes has outsized moves that are typically to the downside.