JPMorgan uncovers why ‘day’ traders in S&P 500 were left behind

The JPMorgan Chase & Co. logo is displayed at their headquarters in New York, Monday, Oct. 21, 2013. JPMorgan Chase & Co. has tentatively agreed to pay $13 billion to settle allegations surrounding the quality of mortgage-backed securities it sold in the run-up to the 2008 financial crisis, a person familiar with the negotiations between the bank and the federal government said Saturday.  (AP Photo/Seth Wenig)

JPMorgan uncovers why ‘day’ traders in S&P 500 were left behind

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    • Since April, if you were to have bought the main gauge when the market opened, only to sell on the close, you'd have left major gains on the table, throwing into disarray a winning strategy since the beginning of 2020.
    • That winning strategy -- to buy the S&P 500 (NYSEARCA:SPY) at the open and sell on the close -- itself was a departure from a winning strategy that had held for the SPDR S&P 500 (SPY) since its inception in 1993.
    • Bespoke Investment had uncovered that buying the SPY on the close, and selling at the open every day since 1993 led to gains nearing 570%, while buying at the open and selling at the close returned just 3% over that period, and that through the first 100 trading days of 2020, the strategy was flipped on its head, leading to outsized losses.
    • But as of April, it appears the long successful strategy is back in form, and JPMorgan says it has found out why. 
    • The analysts looked into behaviors of Asian and European markets, and found that the reactions suggested that "the most important news or flows" were likely happening during European hours.
    • They pointed to PMI data and other virus-related developments that were occurring outside of regular U.S. hours and were leading to reactions in extended trading.
    • Other unsubstantiated theories, like that of foreign investors driving the action, were unlikely to be the cause, they said.

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