An overnight gap is when SPY opens meaningfully above or below its previous close. It happens because the cash market's 9:30–4:00 hours are only part of the story: index futures trade nearly around the clock, and news, earnings, and global sessions move price while the stock market is shut. The open is simply where price arrived overnight, not a fresh start from yesterday's close.
What creates the gap
Several forces move futures overnight: after-hours earnings from big components, macro data (an 8:30am CPI or NFP print), overseas market moves in the Asian and European sessions, and geopolitical headlines. By 9:30, the accumulated effect is a price that may sit well away from yesterday's close — and the pre-market range has usually already begun forming the day's fresh levels around it.
Why the gap is the morning's first read
The gap frames the entire session. A large gap tells you the overnight repricing was significant and the day may be catalyst-driven; a small gap suggests a quieter continuation. Crucially, the key question becomes whether the gap will hold and run (gap-and-go) or fill back toward the prior close (gap-fill) — one of the most useful early reads a scalper has. The prior close, and the gap relative to it, become reference levels in their own right.
The open isn't where yesterday ended — it's where the overnight world dragged price to. Reading the gap is reading what happened while you slept.
Trading it
Start each session by measuring the gap: how big, driven by what, and where price sits relative to the prior close and the pre-market range. Let the opening range and the gap-and-go/gap-fill question guide your first trades. NoVo draws the overnight and pre-market structure so the gap and its levels are on your map at the bell — the context that shapes everything the session does next.