Huge Nasdaq intraday reversal could signal what’s to come

A remarkable phenomenon occurred in U.S. markets this week as Russia began invading Ukraine.

On Thursday, the technology sector-heavy Nasdaq index opened at 12,588 points, down 4% on the previous close as the drumbeats of war echoed across the world.

While most analysts predicted a sea of red would ensue all day, the market had other ideas.

It closed at 13,474 – an 886 point gain.

Measured on points, it was the biggest one day move (from open to close) in the history of the Nasdaq index.

In percentage terms, the 7% move is the seventh largest one day move (from open to close) in the Nasdaq’s history.

The gains then continued on Friday, with the Nasdaq adding a further 1.6% to close at 13,694, despite Russia continuing to advance in Ukraine.

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Crescat Capital: Brutal bear market?

Analysis by Crescat, a leading Denver-based macro hedge fund, shows that intraday reversals on the Nasdaq of more than 5% have only occurred during one type of market environment – bear markets.

“The last 21 times Nasdaq had an intraday reversal of over 5% happened during brutal bear markets,” says Crescat portfolio manager, Otavio Costa.

Crescat capital intraday reversal

Costa shared a chart on his Twitter account showing the majority of the intraday reversals of more than 5% in the history of the Nasdaq occurred during the tech wreck. While a handful also occurred in the GFC bear market during 2008-2009.

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