There's a paper here that has spawned hundreds of dubious strategies called 'intraday momentum'.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2440866
It says on SPX the first half hour of trading predicts the last half hour, stronger on volatile days. The stats look convincing

1/n

This is entirely possible due to variance swap delta hedging, which i wrote about once in another life.

Var swap owners (banks) will sell down days at the close and buy up days to hedge, will produce the effect seen.

2/n

I dont think anyone has ever made that connection before but to me its clear.

So here's the kicker. Now the market is getting full of these 'QIS' strategies that are eating into structured products space. The market is changing.

3/n

What they do is follow the paper above - wait for some intraday signal, trade, and close the position on the close. So if market is down early, sell, and buyback at 4pm.

4/n

In the days of variance swap dominance this could work. On a big down day you'd be selling ahead of the var swap hedgers and buying back just as they sold vast quantities of futures in turn.

5/n

Now, however, we can have big down days early and there's no follow through. We've seen this repeatedly since April - the move on the close is much more muted than in Feb/March. This is because the short variance books all blew up and they haven't come back (bye Malachite, ).

However the dynamics are still there in the history and influencing the backtest - so every mid level structurer on the street is salivating at the idea of intraday trading like the trader they always wanted to be - but the market has changed.
7/n

On a collapse, these products BUY around 4pm , so you get a bottoming process. Conversely they buy rallies intraday and sell at 4PM. Opposite of the var swap hedging, and binary - not quadratic in spot move so less chaotic.

8/n

But if the spot move is large enough to hit everyone's trigger, there may be decent volume here. And you'll continue to see stability and mean reversion around the close, rather than the panic last seen before the March expiry 2020.

Worth monitoring.

9/9

"JP Morgan has seen considerable interest from clients looking to get exposure to a bespoke version of its intraday momentum strategy"...

"Intraday momentum strategies have been a big focus of my team"

https://www.jpmorgan.com/solutions/cib/markets/investable-indices/risk-premia-defense

June 2018