Early Look (Pre-15:45pm) Closing Imbalance Meter for NYSE Listed Stocks

 


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Early Look Imbalance Meter for NYSE Listed Stocks 

Advantage End of Day Supply and Demand Information to Predict The Direction of the Market Into the Close of Trading

The Early Look (14:50PM EST-15:45PM EST) Imbalance Meter for NYSE Listed Stocks gives traders a competitive edge at the close of trading.  The Early Look Imbalance Meter captures unstructured imbalance information starting at 14:50PM EST through 15:45PM EST each afternoon.  Brokers situated at various nodes on the floor of the New York Stock Exchange broadcast imbalance information using a proprietary voice recognition based inputting technology that aggregates the data into a single stream, pushes the stream of data to the cloud where it is cleaned and sent out via an API to the front end meter.  The data is captured through a manual voice inputting process so it is delayed.  However, the data is as efficiently and accurately collected and distributed as possible given the various rules and regulations related to the dissemination of these data.

The impetus for the product was borne from the question Do Early Look MOC Imbalances Predict Price Direction into the Market's Close?  

After laboriously collecting and cleaning years of unstructured imbalance data and completing thousands of backtests using hundreds of variations of a naive strategy we found the following return matrix:

Description: Trading the imbalance, table

The table above depicts the performance of a naive strategy that trades off of the Early Look imbalances.  The values represent the yield given various average entry and exit times (in bps). 

For example, an average entry time of 15:30PM EST with an average exit at 15:49PM EST yields a return of 2.38 bps.  An average entry time of 15:33PM EST coupled with the same average exit time of 15:49PM EST yields a return of 4.81bps.  

After 15:55PM EST, there is sharp decay in yield over this particular period of time indicating high probability of reversal in price.  

Markets are always changing and for this reason optimal average entry and exit times also change  with market volatility.  In highly volatile markets, for example, the size of the yield tends to expand.  

In the table below we see an expansion of yield in more volatile markets,

Description: Trading the imbalance, table

Above, it is clear that an average entry time of around 15:40PM EST and an average exit time of around 15:56PM EST yields a return of around 18.91bps.

The Early Look Imbalance Meter provides a simple market sentiment gauge that can infer market bias from the market on close imbalance orders of a universe of actively traded NYSE Listed stocks posted between 14:50PM EST and 15:45PM EST.   

The Early Look Imbalance Meter provides users nearly real time visual depictions of aggregated MOC imbalances as a function of notional value, the total dollar value of MOC imbalances posted and the break down of buy and sell imbalances.

 Frequently Asked Questions:

Does it Makes Sense to Trade into the Close Today?  

If the Meter  is showing an ~ 50%/50% reading, then the probability of stock prices moving one way or another into the close may not be very high.  As such, if a user's trading or investment strategy is directional, then the odds of the meter predicting the direction of the market into the close is not very high.  However, there may be opportunity in individual names that could be accessed via the API Mod which requires a relationship to be established with one of our NYSE Floor Brokers.

Does it Make Sense to Increase Bet Size Into the Close on Some Days?  

The Early Look Imbalance Meter will be most useful and predictive on days where there is an Options Expiration, End of Week (Friday's), End of Month, End of Quarter, Index Rebalancing or typically any day where there is a lot of market volatility.  For example, if there is an S & P Index Rebalancing and The meter is showing a 90%+ Buy/Sell reading, then the odds are that stocks will move higher/lower into the closing auction. 

REMEMBER:  Everything works in averages and probabilities so these patterns play out over time and are just expected values, NOT absolute certainties.  There will of course be days where there is a 90%+ meter reading suggesting the market will move in one direction and then the market for no apparent reason whatsoever moves in exactly the opposite direction.  

 
What is the Early Look (Pre 15:45PM EST) NYSE Closing Imbalance Meter?
 
The Early Look Imbalance Meter is a nearly real time data feed of market on close (MOC) imbalances for a curated universe of actively traded NYSE Listed stocks broadcast live from 14:50PM EST to 15:45PM EST.  The NYSE electronically publishes these data from 15:45PM EST onward.
 
Early Look's efficient data collection and distribution system is Patent Pending.
 
 
Why Does the NYSE MOC Data Sometimes Differ from the Early Look Data?
 
The Early Look Imbalance Meter aggregates data from a universe of curated stock symbols based on factors resulting from extensive closing imbalance research.  The aim is to relay the most statistically useful imbalance data to users as efficiently and as accurately as possible.  
 
Users are encouraged to subscribe to the Historical Early Look Data and perform their own data analytics and come up with new strategies and creative new ways of extracting insight from these data.
 
 
Are there other Early Look (Pre 15:45PM EST) products?
 
The meter along with historical imbalance data, an API and various execution and routing algorithms are available as mods via the Alpha Modus Mod Library.
 
 
Can the Value of Early Look (Pre 15:45PM EST) Data Become Diluted Due to Too Many Users?
 
This is a possibility as in any market edge.  However, the number of subscribers would have to be astronomical since the time frame over which the imbalance meter operates is amongst most liquid periods of the trading day.  
 
 
We monitor the data carefully and if we get any where near the point where the integrity of the product is jeopardized by too many subscriptions we will stop taking new subscriptions.
 
 
Will it work on my mobile device?
 
Yes.  You can log into the Alpha Modus website through your smart phone and access your Early Look Imbalance Meter through the Mod Dashboard.
 
 
Why does my meter stop working at 3:45pm EST?
 
At 3:45PM EST, the ability to place “Market-On-Close” (MOC) orders on NYSE stocks ends. At that point the NYSE electronically publishes final MOC imbalance numbers.  
 
After 15:45PM EST,
 
- Exchange systems will automatically and electronically track all MOC/LOC interest, as opposed to the DMM.
- One single “Mandatory MOC/LOC Imbalance Publication” if there is a significant imbalance (either > 50,000 shares, or if < 50,000 shares, significant relative to daily volume).
–  Last sale at 3:45pm will serve as reference point for “Mandatory MOC/LOC Imbalance Publication”.
– After 3:45pm MOC/LOC orders may only be entered to offset the published imbalance.
– After 3:45pm no MOC/LOC orders may be entered if there is no published imbalance.
– MOC/LOC orders may be cancelled or reduced between 3:45-3:58pm in the case of “legitimate errors”.
– After 3:58pm MOC/LOC may not be cancelled or reduced period.
– NEW order type: CO order = conditional-instruction limit-type order.
– CO order eligible for the Close only when there is an imbalance on the opposite side of the CO order. This order is subordinate to all other eligible interests.
– CO orders are not included in the “Mandatory MOC/LOC Imbalance Publication”.
– CO orders may be entered on any side of the market at any time right up to the Close.
– CO orders may be cancelled or reduced between 3:45-3:58pm in the case of “legitimate errors”.
– After 3:58pm CO orders may not be cancelled or reduced period.
– After 3:45pm Imbalance Information published every 5 seconds.
Please Watch the Early Look Imbalance Video Introduction to Learn More.
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