A Simple Intraday Signal That Predicts Next-Day Returns

Testing it on 26 years of SPY Data

In this week's Research Insights, I test a recently proposed intraday signal on SPY. Most trading signals look at closes, opens, or yesterday's move, but what if the real information is in the pattern of today's intraday action? The signal is straightforward to calculate and utilizes only OHLC data. I replicated it on 26 years of SPY data and tested it under realistic transaction costs. Like most intraday signals, it's sensitive to execution costs, but I discuss when and how this type of edge can actually survive.