Incorrect (phantom) bars

[wavesurfin]

Hello
In my intraday US index charts, I have always an incorrect opening bar. This bar actually closes the gap between the last session close and the current session opening. Since this move does not happen in reality, I would highly prefer to look at the true picture without having falsy closed gaps.
What can I do to correct this, please.

A picture with an example of yesterday is attached.

Thank you

[ACM]

Re: Incorrect (phantom) bars

wavesurfin
FWIW the Open of the Dow Industrials on November 9 was 12,166.40
Enclosed below are some screenshots captured from NYSE, Bloomberg, FreeStockCharts and Google Finance that corroborate eSignal’s chart
Alex

Originally posted by wavesurfin
Hello
In my intraday US index charts, I have always an incorrect opening bar. This bar actually closes the gap between the last session close and the current session opening. Since this move does not happen in reality, I would highly prefer to look at the true picture without having falsy closed gaps.
What can I do to correct this, please.

A picture with an example of yesterday is attached.

Thank you

[EricB123]

That behavior is quite normal for many stock market indexes and is a result of the way those indexes are reported. As indexes are a calculated value based on the averaging methodology of the underlying stocks, they do not represent an actual price of a transaction (there is no first trade of an actual index). In many cases the initial value at the instant of market open is, by definition and principal, the value at the close of the prior day. After the open the indexes are updated periodically at regular intervals, i.e., the values are not continuous but are snapshots. Dow Jones updates the value of $INDU every 2 seconds during the U.S. market open trading times; S&P updates the S&P 500 every 15 seconds after the open.

If you want to visualize the gap then I suggest you use the major tracking ETF instead of the index, use DIA instead of $INDU, SPY instead of $SPX, etc.

[EricB123]

A brief follow-up -- I did a bit of research specifically on the DJIA to get a clear answer. If you look very closely or check the values (Yahoo Finance is good for that), you will see that there is often a very small gap in the value of the index between the prior close and the next session Open. As explained by one of the Research Analysts at Dow Jones Index Support, "the open is calculated with the first trade of the first component to trade, the previous close is used for the remainder of the components unless an adjustment was made to a particular component's previous close due to a corporate action such as a split, dividend, etc".

So what you are seeing for $INDU is correct.

There is also a theoretical Open value based upon calculating the index with the first trade price of all 30 components in the DJIA. But those first trades can come at different times after the open (sometimes it takes several seconds to a few minutes) for all components to have posted their first session trade. That would probably give you a good representation of the opening gap, but because of the different times involved it can't be pinpointed to a time. There is also a theoretical high and theoretical low for each day, and they have the same issues with time.

[wavesurfin]

@EricB123
Thanks a lot for your comprehensive explanation.

@Alexis
Also many thanks for the empirical evidence.