This wacky daily trading strategy posted a 13% return in this rough year

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- However, this strategy bears no fundamental explanation.

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Possible explanation: the strategy is being compensated for bearing overnight risk.

However, I have a feeling the strategy is not applicable in the long term, possibly due to over-fitting to the data. On a few afternoons, I played around with developing strategies on thinkorswim. I produced a few that worked on my initial testing period, but once I went back further, the strategies no longer worked. I have a feeling that this strategy is the same way.

What the strategy is telling us about having something to potentially implement as an investor is unrealistic, and therefore uninteresting; but what the strategy is telling us about what moved markets in 2018 may be interesting.

One possible explanation is that the information that broke during trading hours in 2018 tended to be more bearish, and that the information that broke during non-trading hours in 2018 tended to be more bullish. Given the amount of times that positive U.S.-China trade news broke overnight or over the weekend, that makes some sense. (Although I also seem to recall that some of the "Kudlow bounces" occurred during morning trading hours, and conversely, that a lot of missed numbers from Facebook or Apple broke after the closing bell.)

Another possible explanation is that the bearish market moves in 2018 tended to be caused by "smart money" pushing down stocks in afternoon trading, while the non-smart money tended to bid up prices in the morning, and before the opening bell.

Together, I think those two explanations go a long way toward explaining the 13%, and the phenomenon is interesting, because it might point toward a pattern of bulls bidding up overnight on rumors and breaking news, while bear raids occur in the light of day as the news gets fully investigated and digested.

Anyone able to produce a longer chart to see what would've happened, say you extended this backwards to 2017 as well?

Your points are good ones, I think about the media and their influence on "animal spirits" on the daily a lot. It's certainly been around, but heck even since 2008 theres a ton more information and sources to influence the decisions of your average "day trader"