Fed Hikes, Market Slips. Another Dip to Consider

Charts, Commentary, News, Technical Analysis

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.

Read this article in its original format at AlmanacTrader.com

As always, please use protective buy and sell stops when trading futures and options.

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Stock Trader's Almanac (1059 Posts)

Jeffrey A. Hirsch is Editor in Chief of the Stock Trader’s Almanac. His latest book "The Little Book of Stock Market Cycles" (Wiley) was published in August 2012. As a frequent participant in the MrTopStep IM-Pro Trading Room, he shares trading insights with our other professional traders and new traders eager to experience the power of collective intelligence. Join us today and get the edge only social trading can give you.

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