Records Are Made To Be Broken

Well, that didn’t take long … META’s record $197B surge in market value earlier this month was eclipsed by NVDA today, which according to Bloomberg, added $277B in market cap. This one day gain is greater than the entire market cap of AMD, their closest competitor for graphics processors.

This of course led to resounding new highs in both the S&P 500 and NASDAQ 100 (the broader NASDAQ Composite is still below its record high.) Both indexes also clocked in with the largest percentage gains in over a year. The combination of extreme gains coupled with record highs seemed unusual to me and indeed it is, happening only six times prior in the S&P since 1928. Instead of the continued strength one might expect, mean and median returns have been negative up to one month out after this pattern has been observed.

Turning to the NDX, we find similar results albeit with an even smaller sample size since history only goes back to 1985.

Obviously the sample sizes are extremely small so take these results with a larger than normal grain of salt. But like the Russell study from last week showed, headline grabbing returns often lead to short-term disappointment.

• How to interpret event study results

class RecordHigh : Strategy
{
    public static void Run()
    {
        AsciiBarServer server = new AsciiBarServer(@"c:\data\orchestrator", AsciiBarServer.DOHLC);
        var data = server.LoadSymbol("SPX Index").Close.ToBarSeries();

        var strat = new RecordHigh();
        strat.PrimarySeries = data;
        strat.RunSimulation();
        strat.EventStudyReport();
        strat.Chart();
    }

    protected override void OnStrategyStart()
    {
        base.OnStrategyStart();

        Col1 = Indicators.Highest(Close);
        Col2 = PercentChange();
        Col3 = Indicators.BarsSinceHigh(Col2);

        Console.WriteLine($"% Chng {Col2.Last:P2} largest in {Col3.Last} bars.");
    }

    protected override void OnBarClose()
    {
        base.OnBarClose();

        if (Close.Last == Col1.Last && Col3.Last >= 252)
        {
            SnapEvent();
        }
    }
}