Last night I showed that when the Fed disappoints and the market drops by 1% or more in reaction to it, then the market has generally recovered and worked its way higher over the next couple of weeks.
The Fed disappointed today, although not to the degree we looked at last night. The S&P finished down a relatively mild 0.4%. While the end result wasn’t that poor, the fact that it was up 1% shortly after the announcement and then faded late left many traders with a bad taste. Measuring where in its range the market closed the day is one way to measure the mood near the end of the day. Today the market closed very close to its lows. I ran a test to see how the market performed after closing near its lows on a Fed day. Results below:
Also notable about today was the fact that the market made a recent high. I ran a test to see the following 1) Fed day 2) Made 20-day high. 2) Closed in bottom 10% of range. I was only able to find 3 instances. Therefore I removed the Fed day requirement. Below are those results:
Some technicians may suggest today was an ugly late-day reversal. I’m having trouble finding much ugly about it.