Short-term FOMC ‘Seasonal’ Setup in Effect

With the FOMC announcement on tap for Wednesday, now is a good time to review the very short-term bullish ‘pre-FOMC’ seasonal setup that went into effect at today’s close. The last thirty regularly scheduled Fed days are listed in the table below, beginning with the price of the S&P500 (SPX) at 4pm ET on the day prior to the announcement and ending with the net change at 2pm ET on the day of the announcement. Note the general theme of limited downside potential. In 23 out of 30 cases, or 77% of the time, the S&P was trading higher at 2pm ET on the day of the FOMC announcement. Even on the seven cases in which it failed to rally, it never fell by more than 0.5% in this intraday time frame…

S&P500 Performance Pre-FOMC Announcement
04/28/09 4:00pm ET 855.16 – 04/29/09 ??? @ 2:00pm ET
03/17/09 4:00pm ET 777.53 – 03/18/09 +0.91 @ 2:00pm ET
01/27/09 4:00pm ET 846.15 – 01/28/09 +25.51 @ 2:00pm ET
12/15/08 4:00pm ET 869.40 – 12/16/08 +13.28 @ 2:00pm ET
10/28/08 4:00pm ET 940.27 – 10/29/08 +7.85 @ 2:00pm ET
09/15/08 4:00pm ET 1197.72 – 09/16/08 -5.86 @ 2:00pm ET
08/04/08 4:00pm ET 1248.69 – 08/05/08 +23.56 @ 2:00pm ET
06/24/08 4:00pm ET 1314.76 – 06/25/08 +10.54 @ 2:00pm ET
04/29/08 4:00pm ET 1391.63 – 04/30/08 +4.57 @ 2:00pm ET
03/17/08 4:00pm ET 1276.77 – 03/18/08 +38.02 @ 2:00pm ET
01/29/08 4:00pm ET 1362.00 – 01/30/08 -4.61 @ 2:00pm ET
12/10/07 4:00pm ET 1516.38 – 12/11/07 +5.33 @ 2:00pm ET
10/30/07 4:00pm ET 1531.27 – 10/31/07 +11.22 @ 2:00pm ET
09/17/07 4:00pm ET 1476.40 – 09/18/07 +10.67 @ 2:00pm ET
08/06/07 4:00pm ET 1466.82 – 08/07/07 +8.04 @ 2:00pm ET
06/27/07 4:00pm ET 1506.80 – 06/28/07 +5.09 @ 2:00pm ET
05/08/07 4:00pm ET 1507.79 – 05/09/07 +0.69 @ 2:00pm ET
03/20/07 4:00pm ET 1410.49 – 03/21/07 +3.56 @ 2:00pm ET
01/30/07 4:00pm ET 1428.82 – 01/31/07 +9.94 @ 2:00pm ET
12/11/06 4:00pm ET 1413.04 – 12/12/06 -2.18 @ 2:00pm ET
10/24/06 4:00pm ET 1377.22 – 10/25/06 +1.68 @ 2:00pm ET
09/19/06 4:00pm ET 1318.50 – 09/20/06 +8.65 @ 2:00pm ET
08/07/06 4:00pm ET 1276.04 – 08/08/06 +0.89 @ 2:00pm ET
06/28/06 4:00pm ET 1246.38 – 06/29/06 +8.22 @ 2:00pm ET
05/09/06 4:00pm ET 1324.81 – 05/10/06 -2.08 @ 2:00pm ET
03/27/06 4:00pm ET 1301.61 – 03/28/06 -4.91 @ 2:00pm ET
01/30/06 4:00pm ET 1285.20 – 01/31/06 -2.47 @ 2:00pm ET
12/12/05 4:00pm ET 1260.43 – 12/13/05 +10.82 @ 2:00pm ET
10/31/05 4:00pm ET 1207.01 – 11/01/05 -4.80 @ 2:00pm ET
09/19/05 4:00pm ET 1231.04 – 09/20/05 +1.44 @ 2:00pm ET
08/08/05 4:00pm ET 1223.10 – 08/09/05 +7.89 @ 2:00pm ET

Keep in mind that in addition to the three-day buy setup triggered at Monday’s close, a very similar setup that I recently discussed back on April 22nd is also in effect. On Monday, the S&P closed down more than two-thirds of one percent (-0.66%) and the Nasdaq100 closed down less than one-third of one percent, and as I noted last week, the SPX has a very strong track record (28 out of the last 30 occurrences) at posting a subsequently higher close following this pattern. This reinforces the potential for a close back above SPX 857 by Thursday…

S&P500 -0.66% or More, NDX -0.33% or Less
04/27/09… ???
04/22/09? Higher S&P close one sessions later
04/06/09? Higher S&P close three sessions later
03/19/09? Higher S&P close two sessions later
02/20/09? Higher S&P close two sessions later
02/04/09? Higher S&P close one sessions later
10/29/08? Higher S&P close one sessions later
10/08/08? Higher S&P close three sessions later
08/12/08? Higher S&P close two sessions later
07/31/08? Higher S&P close three sessions later
07/15/08? Higher S&P close one sessions later
07/07/08? Higher S&P close one sessions later
05/23/08? Higher S&P close one sessions later
03/07/08? Higher S&P close two sessions later
02/28/08? No higher close within three days
06/13/06? Higher S&P close one sessions later
09/13/05? Higher S&P close three sessions later
07/21/05? Higher S&P close one sessions later
05/12/05? Higher S&P close two sessions later
10/13/04? Higher S&P close three sessions later
06/25/03? Higher S&P close one sessions later
04/16/03? Higher S&P close one sessions later
02/11/03? Higher S&P close three sessions later
01/22/03? Higher S&P close one sessions later
12/17/02? No higher close within three days
09/24/02? Higher S&P close one sessions later
04/15/02? Higher S&P close one sessions later
03/05/02? Higher S&P close one sessions later
10/18/01? Higher S&P close one sessions later
10/08/01? Higher S&P close two sessions later
08/09/00? Higher S&P close three sessions later

Volume was very light Tuesday. NYSE volume hit its lowest level in over two months, as did volume in the QQQQ. Historically, a two-month low for QQQQ volume has usually led to short-term weakness given the absence of institutional firepower. Out of the last 30 separate instances in which QQQQ volume hit a two-month low, 27 led to a subsequently lower QQQQ close within the next few sessions. That 90% win rate is significantly above the 67% at-any-time odds for a lower QQQQ close within three days. This tends to suggest conditions could remain choppy short-term, meaning a higher close on Wednesday could be followed by a downside reversal, while a lower close on Wednesday would most likely be followed by a rally on Thursday…

QQQQ Volume Hits its Lowest Level in Forty Trading Days
04/28/09…
12/26/08… QQQQ lower close one day later
12/24/08… QQQQ lower close one day later
11/28/08… QQQQ lower close one day later
11/03/08… QQQQ lower close two days later
08/22/08… QQQQ lower close one day later
04/28/08… QQQQ lower close two days later
04/21/08… QQQQ lower close one day later
04/14/08… QQQQ no lower close within three days
04/08/08… QQQQ lower close one day later
12/24/07… QQQQ lower close two days later
11/23/07… QQQQ lower close one day later
10/08/07… QQQQ lower close three days later
10/02/07… QQQQ lower close one day later
07/03/07… QQQQ no lower close within three days
05/07/07… QQQQ lower close three days later
04/05/07… QQQQ lower close one day later
03/23/07… QQQQ lower close two days later
12/26/06… QQQQ no lower close within three days
11/24/06… QQQQ lower close one day later
08/31/06… QQQQ lower close three days later
07/03/06… QQQQ lower close one day later
05/08/06… QQQQ lower close one day later
03/27/06… QQQQ lower close one day later
11/25/05… QQQQ lower close one day later
11/14/05… QQQQ lower close one day later
09/12/05… QQQQ lower close one day later
08/19/05… QQQQ lower close two days later
05/27/05… QQQQ lower close one day later
11/26/04… QQQQ lower close one day later
10/11/04… QQQQ lower close one day later

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

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