Higher high or lower low based on where closed in previous day range

Next study is looking at the closing position with respect to the range and how likely the high, low, pivot or various points will be crossed the next day.   For this study, looking back the previous 3000 days of SPY, I took the closing position as to where it fell in the days range and looked to see what happened the next day.  I sorted the results and grouped in deciles.

decile position cross -33% cross low cross +33 cross +66 cross high cross 133% cross pivot CROSS MID lower low higher high
1 8% 44% 72% 66% 35% 15% 7% 66% 46% 77% 15%
2 18% 47% 70% 71% 38% 21% 10% 64% 52% 74% 21%
3 30% 44% 61% 75% 55% 35% 19% 70% 66% 65% 35%
4 43% 36% 56% 71% 60% 39% 19% 71% 73% 59% 39%
5 55% 34% 48% 66% 73% 55% 32% 71% 71% 51% 58%
6 67% 29% 43% 61% 72% 52% 33% 70% 69% 45% 56%
7 77% 21% 36% 54% 72% 57% 36% 66% 61% 37% 63%
8 86% 17% 25% 44% 64% 66% 43% 60% 54% 25% 75%
9 94% 11% 19% 38% 63% 71% 39% 60% 47% 20% 77%
10 100% 14% 21% 34% 58% 68% 41% 58% 47% 21% 78%

The first column is the decile, the second column is the bottom closing position – in other words, the (close-low)/(high-close) is .08 for the 300th of 3000 data points.  this also points out that the closing position is not uniform – if it were, then the second column would be 10, 20, 30, 40, 50, 60, 70, 80, 90, 100.

The biggest take away from this table is there is some momentum effect – a day that closed towards the bottom of the range will more likely have next day with a lower low than a higher high.  Similarly a day that closed towards the top of the range will more likely have a higher high the next day.  A close near the midpoint of the range is more likely to cross the prior day’s pivot point.

I have no studies on the confidence intervals, so I don’t know if 75% vs 71% is statistically significant.

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