As long as markets remain freely traded, true price discovery will ultimately prevail—even if there has been an extended, multi-year effort to create a system that ensures equity markets always move upward.
The current intra-day price action in this market reflects a mean-reversion, counter-trend environment. It's essential to understand that day-trade price movements often diverge from longer-term trends—a critical consideration when managing a portfolio of trading systems.
In 2024, the Nasdaq 100 exhibited a striking pattern: while the overnight trend drove gains, the day-trade trend moved downward. Remarkably, more than 100% of the Nasdaq 100's gains occurred during the overnight session, leaving the day session with a net loss.
Today, the broader trend remains down, yet intra-day activity is defined by sideways chop and persistent dip buying, fueled by liquidity injections that have been in place since 2009.
However, we may be entering a cycle we haven’t seen in quite some time: sustained and persistent intra-day selling without the quick rebounds we’ve come to expect. Markets exhibit varying intra-day cycles and don’t always recover immediately after sell-offs, as they often have since the Fed expanded its balance sheet to nearly $9 trillion during the pandemic.
Comments