Daily Commentary - Posted on Monday, September 20, 2010, 11:07 PM GMT +1

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Sep Monday 20

SPY 2 up before FOMC session

With US major market indexes almost going vertical (up), historical occurrences (e.g. seasonalities like September’s triple witching) and respective probabilities and odds (which were heavily lopsided in favor of the downside on Monday, September 20) as well as mean-reversion tendencies currently (but hopefully temporarily only) doesn’t seem to matter.

With the SPY (S&P 500 SPDR.) up on Friday, September 17 and on today’s session as well, the SPY closed higher on a back-to-back session immediately preceding tomorrow’s FOMC (Federal Open Market Committee) announcement session which historically has been a bullish indication with respect to the SPY‘s performance over the course of the then following 3 sessions.

Table I below shows the SPY‘s performance (since 1990) on the FOMC announcement session (in this event on Tuesday, September 21, ‘next session‘) as well as 3 and 5 sessions later in the event the SPY closed higher on a back-to-back session immediately preceding an FOMC announcement session in the past.

( * = no close below the trigger day’s close during next 5 sessions )

With two higher closes on those sessions immediately preceding an FOMC announcement session, the SPY closed higher on an FOMC announcement session (in this event on Tuesday, September 21) on 23 out of the last 26 occurrences (max. loss -0.74%), and was trading at a higher lever 3 sessions later on 15 out of the last 16 occurrences. In addition, the SPY posted at least one higher close over the course of the then following 3 sessions (in this event until Thursday, September 23) on 47 out of those 50 occurrences (thereof on all of the last 30 occurrences), and did not post a single close below the trigger day’s close (the session immediately preceding the FOMC annoncement session) on 20 out of those 50 occurrences.

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(Data courtesy of MetaStock , and for data import, testing, surveys and statistics I use MATLAB from MathWorks)


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