Surprise, surprise, the Fed did exactly what was widely anticipated today. Interest rates were raised 0.25% to a new range of 1.75-2.00%. And at the end of the day, DJIA, S&P 500, NASDAQ and Russell 2000 all slipped modestly lower. Historically, down announcement days have been better buying opportunities than positive announcement days.
In the above chart the 30 trading days before and after the last 82 Fed meetings (back to March 2008) are graphed. There are three lines, “All”, “Up” and “Down.” Up means the S&P 500 finished announcement day with a gain, down it finished with a loss. Note how past down announcement days have, on average, enjoyed the best gains over the next 30 trading days.
Of the last 82 announcement days, the S&P 500 finished the day positive 48 times. Of these 48 positive days S&P 500 was down 28 times (58.3%) the next day. Of the 34 down announcement days, the following day was down 19 times (55.9%). All 82 announcement days have 0.41% average S&P 500 gains while the day after has been a net loser with S&P 500 declining 0.32% on average.
As always, please use protective buy and sell stops when trading futures and options.
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