FOMC Meeting Announcement: Historical Context

As we all wait for the big announcement, I thought it would be a good time to take a look at the dominant historical patterns of FOMC Announcement days.  Below is the intraday price action of $SPY of every FOMC announcement day for the last 3 years analyzed using our pattern recognition algorithm.

Clearly this data is biased to the upside but every pattern represented below should all be familiar to you if you’ve been observing FOMC Announcements for the last couple years. Pay very close attention to curve 2 (ramp and reverse). Although it will take a very negative tone to buck the trend higher, the reversal pattern is high on the list and anything is possible.

Another common thread, as many have pointed out, is quiet markets leading up to the report.

FOMC-meeting-days-3year-lookback

UPDATE: The ramp and reverse pattern hit. Compare curve 2 above with the actual price action below. Notice that the high of the day was on the report announcement and the low of the day came on the close. The range and noise is not identical but the expectation and potential for a selloff is very clear.

This move caught  a lot of people off guard, but based on the data it was the second most dominant pattern in the data set.  Tempering biased expectations with hard data is the primary reason we created this tool. Understanding the fundamental movements of the market and how market participants react to market moving events is a critical component of a trading edge. (Note: the percentages in the y-axis are not meaningful. Concentrate on the shape of the patterns represented in each curve).

We are working hard to make this tool available to a wider audience. If you are interested in this type of data shoot me an email and let me know: info@dynamichedge.com.

es_f_june19_fomc_meeting_announcement


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