Tomorrow, the FOMC will finish their third meeting of the year and based upon CME Group’s FedWatch Tool there is just a 5.7% chance they will raise interest rates when the meeting ends.
In the above chart the 30 trading days before and after the last 81 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. Down announcement days have generally been the best buying opportunity while up announcement days were more frequently followed by weakness.
Of the last 81 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 33 down announcement days, the following day was down 18 times (53.1%). All 81 announcement days have 0.42% 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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