A Simple Intraday Signal That Predicts Next-Day Returns
Most traders stare at the close and wonder what tomorrow holds. After years of studying market microstructure, I found that the answer has been hiding in plain sight.
Most traders focus on the closing price. But a growing body of academic research suggests the process of getting to that close — specifically what happens in the final minutes of trading — contains a powerful, exploitable signal that the next morning partially reverses.
You’ve probably sensed it. Some days the market drifts to a close and you feel something building underneath the tape, without being able to name it. Other days it surges into the bell and reverses violently the next morning. Those intuitions aren’t random — they’re reflections of a measurable, reproducible phenomenon. And today, I’m going to show you exactly how to quantify it.
“The market doesn’t hide what it’s going to do. It hides it in the data most people don’t bother collecting.”
I’ve spent years studying market microstructure. I’ve read the academic literature, run the backtests, and traded the signals live. What I’m sharing here isn’t theory dressed up as practice — it’s a specific, implementable signal that has held up across 15 years of equity market data, through bull markets, bear markets, and everything in between.