This research was done using data from the Live Cattle market over a 4-1/2 month period. The results probably would be similar using data from other markets but I've not verified that to be correct.

Using my Quote Machine I made a note of the price exactly 30-minutes prior to the close each day. On the next day I noted the opening price, the days high/low range above or below the open, and closing price. Days were ignored if the 30-minute price and subsequent close were the same.

During the test period a total of 61 trading days had up-trends the last 30-minutes, and 78-days had down-trend the last 30-minutes.

Next Days Close Higher 62% of Time
Next Days Close Lower 56% of Time

The results were bullish for the next day if the price trend was up during the last 30-minutes, a total of 38 out of 61 times, or 62% of the time.

If the last 30-minute trend was down, the next day was likely to be bearish 44 out of 78 times, or 56% of the time.

This test has some good statistical validity. It seems to me that a good trading system could easily be developed based on this research.

Unfortunately, the percentage numbers may not be quite strong enough to make the potential trading system that reliable or profitable. However, with more extensive research done in a number of varied markets, and good money management skills, any potential system based on this research could in fact be highly profitable.

Additional research needs to be done on this subject to decide on the reliability of any potential system based on this concept.

Can Money Be Made Based on Difference Between Closing Price and Settlement Price?

Did you now that the official settlement price and the actual closing price are frequently different and quite often are changed some time after the actual trading ceases?

Some Club Members may not be aware of this fact. However, if you have a quote machine I am sure you have noticed this regular occurrence.

The market stops trading and perhaps Soybeans last tick at exactly 679. Usually, about 10 to 20-minutes or so AFTER all trading stops, the Exchange gives the day's so called settlement price, of say 678-1/2.

Official Closing Price Not Necessarily Based
on The Last Actual Trade That Took Place

Thus, even though the last actual trade was at 679, the official closing price will be 678-1/2 that will be published in newspapers and data vendors.

Another example is TBonds last trading at say 113-04, but about 15-minutes AFTER trading stops the Exchange reports they settled at 113-03.

Why does that occur? The exact reason is somewhat unclear. However, it seems to be related to the fact the Floor Brokers do some type of settlement between themselves after the actual close of public trading.

It's Possible To Make Money
Based On Close/Settlement Phenomenon

Is there any way money could be made based on this common settlement procedure? Quite possibly! I tested this concept in the Live Cattle market and discovered the following:

A total of 30 closes were observed where the final settlement price was higher than the last tick actual trade price. On 22 days the next day's closing price was bullish, or 73% of the time!

A total of 28 closes took place that resulted in the days final settlement being lower than the day's last tick. On 21 days the next day's close was lower, or 75% of the time!

This analysis is far from complete. Additional markets and a greater time period need to be analyzed. However, there's a reasonable chance money could be made using these observations and concepts.