NASDAQ-100 futures (CME.ND) pulled a cruel trick on investors Tuesday, starting out the month of July with a 'big' gap d
own of more than
1% before managing to rally and close higher with a 'big' 1.2% gain for the day. The hectic day of trading saw several swings of 1% or more in both directions, with the NASDAQ-100 plummeting mid-day to take out its previous 50-day low before staging a ferocious late day rally to end at 1869, up 23 points on the day, and printing an 'outside day' pattern.
The stock market has been full of nasty tricks this past month so it
’
s nice to finally get a treat for a change. Will the positive surprises keep coming or is the NASDA
Q-100 setting up for one huge drop
?
Q:
What happens when CME.ND futures cross below their 10-day low on the same day they managed to rally, closing up at least one half of a standard deviation over the previous 30 day average of one day moves?
A:
Since the product
’
s listing, there have been 19 completed instances of the above described event. In 17 of those instances NASDAQ 100 futures rally, gaining an
average of 2.6% over the next four
trading days. Conversely, the two
declines have a mean of
4%, suggested in the rare case in which CME.ND futures fall, they fall big. Nonetheless the overall average of +1.9% per trade, near 90% winning percentage, and a t-stat of +3.0 make this idea a treat.
Jason Thompson
is a Chicago-based speculator focusing on electronically traded derivatives and their underlying instruments.