Most Efficient Nasdaq 100 Since 2009

Intra-day today, on November 7, 2024, FOMC Day and two days post-election, the Nasdaq 100 index is up over 4,000 points on the year from the start of trade in January while the sum of the intra-day open to closes in this index is -50 points.

Based on Monday's close on November 4, 2024, ahead of the election, the Nasdaq 100 saw a net gain of 3,138 points for the year, while the cumulative gain from open-to-close trades amounted to -533 points for the Nasdaq 100 cash index. This means that buying the open and selling the close of the Nasdaq 100 would result in a net loss for 2024, even though the index itself has risen by 4,000 points intra-day as of November 7, 2024.

How Rare and Unusual Is This?

Since 2009, following the implementation of Quantitative Easing (QE), buying the open and selling the close has generated a positive net gain each year, with the exceptions of 2018 and 2022, both of which were down years.

The net gain in the Nasdaq 100 for 2024 has primarily come from overnight moves. This week's trading has seen some "catch up," with many brokers removing day-trade margins between November 5 and November 7, 2024.

Efficient markets are often challenging to trade. As short-term algorithmic quant traders, we aim to identify and capitalize on market inefficiencies. The Nasdaq 100 ($NDX.X) closed 2023 at 16,825.93 and has since rallied roughly 4,000 points through today's trading on November 7, 2024.

In this video, we highlight how, as of November 7, 2024, the net gain from open-to-close trades in the Nasdaq 100 stands at approximately -50 points for the year.

While we do not attempt to predict the future, we do observe market cycles and patterns. We believe one of three outcomes is likely over the next 12 months, with two scenarios involving mean reversion:

1. Major Mean Reversion and a Bear Market Ahead: A reversal of the current trend based on divergences between the overnight trade and day trade could signal a forthcoming bear market.

2. Continued Higher Prices with Some Mean Reversion: This scenario may lead to less efficient markets and more trading opportunities, aligning intra-day moves with the longer-term trend. Such conditions could be highly favorable for many of our trend-based day-trading strategies currently in the portfolio.

3. Continued Higher Prices with Current Market Behavior: This outcome would necessitate more strategies focused on trading overnight trends (long positions) and intra-day counter-trend moves (long and short positions).

   
   

As short-term traders, we cannot ignore and also question the enthusiasm of market bulls, especially when most of the net gains for the Nasdaq 100 in 2024 have occurred during periods of thin trading.

We trade multi-strategy, multi-market portfolios in our portfolios to take advantage of various market environments. Our approach involves cutting losses on underperforming strategies and adding new strategies for patterns that demonstrate persistence.

The algorithms and strategies discussed in this video are not intended as trading or investment recommendations; they serve only as tools to analyze market moves during intra-day versus overnight sessions.

Past performance is not indicative of future results.