S&P Suffers an Unusually Large Loss for an FOMC Announcement Day

The S&P settled down over 1% Wednesday despite breadth holding in 3:2 positive
territory. That's never occurred a single time since 1990. In general, there's
very little to lean on short-term. A couple of FOMC-related seasonal plays are
noted below, but it's tough to rely on seasonals alone in this kind of
environment. Best to wait for a better edge to develop.

The stock market has a seasonal tendency to reverse course immediately after
an 'FOMC announcement day'. This is particularly true when the S&P closes
lower on a Fed day, as the market has a pretty solid record of closing at a
higher level within the next two sessions. The last thirty instances are noted
below...

S&P500 Closes Lower on an FOMC Announcement Day
10/29/08 Down day... ???
04/30/08 Down day... Higher S&P close one session later
01/30/08 Down day... Higher S&P close one session later
12/11/07 Down day... Higher S&P close one session later
06/28/07 Down day... Higher S&P close two sessions later
12/12/06 Down day... Higher S&P close one session later
08/08/06 Down day... Higher S&P close two sessions later
05/10/06 Down day... No higher close within two sessions
03/28/06 Down day... Higher S&P close one session later
01/31/06 Down day... Higher S&P close one session later
11/01/05 Down day... Higher S&P close one session later
09/20/05 Down day... No higher close within two sessions
06/30/05 Down day... Higher S&P close one session later
05/03/05 Down day... Higher S&P close one session later
03/22/05 Down day... Higher S&P close one session later
11/10/04 Down day... Higher S&P close one session later
01/28/04 Down day... Higher S&P close one session later
12/09/03 Down day... Higher S&P close two sessions later
06/25/03 Down day... Higher S&P close one session later
09/24/02 Down day... Higher S&P close one session later
08/13/02 Down day... Higher S&P close one session later
06/26/02 Down day... Higher S&P close one session later
05/07/02 Down day... Higher S&P close one session later
12/11/01 Down day... Higher S&P close one session later
08/21/01 Down day... Higher S&P close one session later
06/27/01 Down day... Higher S&P close one session later
03/20/01 Down day... No higher close within two sessions
01/31/01 Down day... Higher S&P close one session later
12/19/00 Down day... No higher close within two sessions
10/03/00 Down day... Higher S&P close one session later
08/22/00 Down day... Higher S&P close one session later

It's interesting to note that Wednesday was only the twelfth time since 1994
that the S&P500 has closed down 1% or more on a Fed day. Despite all of the
drama and 'uncertainty' surrounding these sessions, it's noteworthy that the
S&P has closed with a small loss or a gain 90% of the time.

SPX -1% on an FOMC Announcement Day
10/29/08 S&P -1.1%... ???
12/11/07 S&P -2.5%... S&P500 +0.6% next session
03/22/05 S&P -1.0%... S&P500 +0.1% next session
01/28/04 S&P -1.4%... S&P500 +0.5% next session
09/24/02 S&P -1.7%... S&P500 +2.5% next session
08/13/02 S&P -2.2%... S&P500 +4.0% next session
08/21/01 S&P -1.2%... S&P500 +0.7% next session
03/20/01 S&P -2.4%... S&P500 -1.8% next session
12/19/00 S&P -1.3%... S&P500 -3.1% next session
11/12/97 S&P -1.9%... S&P500 +1.2% next session
02/05/97 S&P -1.4%... S&P500 +0.2% next session
02/04/94 S&P -2.3%... S&P500 +0.4% next session

If the market does rally Thursday, keep an eye on the Bank Index. This is from
my May 1st column... "Hard not to notice the 4%+ rally in the banking sector
Thursday, particularly on the heels of yesterday's FOMC announcement. While
this could be interpreted as a bullish reaction to the Fed, it's interesting
that similar action over the past decade has been more of a head-fake than the
start of a sustained rally. Out of the eighteen instances since 1998 in which
the BKX closed up 1% or more immediately following an 'FOMC Day', the sector
typically struggled over the next week. Two-thirds of the time the BKX was
lower five trading days later, and in only two cases did the BKX manage a gain
of more than 1.5%. It lost more than 1.5% nine times...

BKX +1% FOllowing FOMC Announcement Day
05/01/08... BKX -5.6% one week later
01/31/08... BKX -4.5% one week later
08/08/07... BKX -7.9% one week later
05/04/05... BKX -1.4% one week later
03/17/04... BKX -3.2% one week later
06/26/03... BKX -0.1% one week later
03/19/03... BKX -0.4% one week later
09/25/02... BKX +0.5% one week later
08/14/02... BKX +2.3% one week later (*)
06/27/02... BKX +0.4% one week later
05/08/02... BKX +1.5% one week later
01/31/02... BKX -6.5% one week later
06/28/01... BKX -2.1% one week later
05/16/01... BKX +1.4% one week later
03/22/00... BKX +1.7% one week later (*)
10/06/99... BKX -5.7% one week later
05/19/99... BKX -4.2% one week later
12/23/98... BKX -0.7% one week later
05/20/98... BKX -3.2% one week later"

Categories : Archived EOD Commentary, End-of-Day Commentary

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