Are Strong or Weak Daily Closes Predictive?

When the stock market close is strong (weak) relative to its daily range, does it indicate pent-up buying (selling) demand? Should one trade with or against this relative close? To investigate, we relate position of the daily close for the S&P 500 Index relative to its same-day range to future return for the index. We calculate:

• Daily range as High minus Low, divided by Open.
• Daily relative close as Close minus Low, divided by High minus Low.

Using daily open, high, low and close levels of the S&P 500 Index during 1/2/62 (the earliest with a daily range) through 3/17/20, we find that:

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