FOMC Announcement Stats

fomc-day-chart-december-17-2013

This is one of the most hotly anticipated FOMC Meeting Announcements in recent memory. Expectations are split between whether the Fed will begin tapering right away or holding off until next year. Divisive events make for market volatility, so I thought it would be a good time to revisit some precedents for FOMC day trading.

Below are the $SPY intraday patterns which are most common over the last two years. Without getting too philosophical the most common patterns for the broad market are bearish. I’ve highlighted after the 2PM release time for emphasis.

fomc-day-december-17-2013

Pattern 1: Following a down trending session, new post-announcement lows continue to sell off into or near the close of the session.  NOTE: This is very close to how the last FOMC day played out (October 30, 2013).

Pattern 2: Up trending market early in the session makes a intraday high on the announcement and sells off the the rest of the session.

Pattern 3: Similar to Pattern 2 except with more two-way volatility.

Pattern 4: Similar to Pattern 2 except peaking slightly after the announcement.

We look for confluence in patterns and overall market direction. Have a look at the above chart and observe the market in real-time for the best insight.

Below are the statistics (post-announcement period) from the perspective of the long side.

fomc-day-stats-december-17-2013

The outlier would definitely be if something new was announced that took the market by surprise. Although, from the data we have it seems that whatever the Fed announces, the initial reaction is disappointment. Longer-term, the market is happy to get free money.


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