The problem with the ASX Indexes

Ever noticed the lack of Gaps on the ASX Indexes? Have a look at the three charts below of the S&P 500, the HSI and the All Ordinaries (XAO).

Notice in the first two, S&P 500 & HSI, that there is all sorts of gap games going on. Gaps and continual moves and gaps and rollovers to fill on the same day etc. They don't look all that dissimilar to the average stock chart. Now have a look at the third one. A lot of the bars actually start where they left off the day before. Most have the tiniest of gaps. Out of 276 days since the start of Jan 09 there has been 176 days (63%) with an overnight gap of 10 points or less and 108 days (39%) with an overnight gap of 5 points or less. That means the index data suggest that it is a two out of three chance to open 0.215% within yesterdays close and a one in three chance of opening within 0.1% of yesterdays close! BS!!

Compared to the S&P 500 taking similar % moves you get 26% and 14%. Half the chance?

Whats going on? Well it isn't that the ASX is less volatile or sluggish on the open. They both move about the same range per day. The problem with the ASX indexes are two fold. Firstly because of the staggered open from 10:00 to 10:08 the opening tick of XJO/XAO is not the true value of "opening price" of all index constituents, this is unique to ASX. In fact the data from 10:00 to 10:08 is really twilight zone stuff.

Secondly and even more strange is sometimes the first tick that the ASX provides for indexes is magically exactly the same as yesterday close, to two decimal points?? Now that would only be possible if all 400 or so stocks, particularly the big caps, that open in the first round at 10:00 am (A to B) traded at their closing price. It doesn't happen! Where this comes from is that the opening auction is at 10:00 am +/- 15 secs BUT if its say 10:00 am +12 seconds the ASX will still take the index quote from 10:00. If you have a look at the data post February 08 virtually every open tick for the ASX is exactly the same as yesterdays close. In fact only 5 of the opens were not exactly the same as the previous close of all of 07's and to two decimal places. It seems that the ASX from February 08 has changed slightly their method for quoting the first tick for indexes but it still doesn't get around the problem of the staggered open.

If you think gaps are at all significant you cannot us the ASX Index charts for a reference. There is simply 100s more gaps in the index than what shows up on the Dodgy charts. The better reference to find gaps for the ASX is the ASX200 SPI chart without the overnight trading. Here is an XJO chart and a SPI cash hours only chart. Notice all the twilight data (circled) in the ASX XJO chart that never actually happened.

 

  

Comments

[Premium Data]

Regarding "staggered" openings - you get this sort of thing anyway with respect to US indexes and the Market Makers/Specialists that operate on NYSE (eg. they might not open up a stock until 9:32am).

In general, the opening value of any index that has has components that may not be available for trading immediately is suspect.

For example, consider a global index that covers stocks from Australia, Japan, Singapore, Europe, North and South America.

Because these instruments are available for trading at different overlapping and non-overlapping times (and in different currencies) then any notion of "open", "high" and "low" is suspect.