Daily Commentary - Posted on Thursday, January 26, 2012, 7:26 AM GMT +1

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Jan Thursday 26

Multi-Month High on FOMC Session

Compliant to historical probabilities and odds, major market indices advanced (again) in response to the FED’s decision to leave rates unchanged for the foreseeable future.

S&P 500 and the SPY‘s (S&P 500 SPDR) closed at a 5-month high (and missed a 6-month high by a single day only; the last time the SPY closed this high was on July 26, 2011), while the Nasdaq 100 index closed at its highest level since February 6, 2001.

Historically, when the SPY had closed at a multi-month high on an FOMC announcement session in the past, this had regularly not been a top, leave alone the top.

Table I below shows the SPY‘s (S&P 500 SPDR) performance (cumulative returns) over the course of the then following week in the event the SPY had closed at an at least 5-month high on an FOMC announcement session in the past.

The SPY posted at least one higher close over the course of the then following week on all 24 previous occurrences, closed at an even higher level one week later on 4 out of every 5 occurrences (or almost 80% of the time),  and 1.0%+ moves on the upside outnumbered -1.0%+ moves on the downside by a very wide margin (only one -1.0%+ loss 1, 3 and 4 days later).

(click on image to enlarge)


Table I
SPY at 5-month high on FOMC announcement session

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Conclusion(s)

For the time being, the trend most probably remains up …

Have a profitable week,

Frank


Disclosure: No position in the securities mentioned in this post at time of writing.

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Remarks: Due to their conceptual scope – and if not explicitly stated otherwise – , all models/setups/strategies do not account for slippage, fees and transaction costs, do not account for return on cash and/or interest on margin, do not use position sizing (e.g. Kelly, optimal f) – they’re always ‘all in‘ – , do not use leverage (e.g. leveraged ETFs), do not utilize any kind of abnormal market filter (e.g. during market phases with extremely elevated volatility), do not use intraday buy/sell stops (end-of-day prices only), and models/setups/strategies are not ‘adaptive‘ (do not adjust to the ongoing changes in market conditions like bull and bear markets). Index data (e.g. S&P 500 cash index) does not account for dividend and cash payments.

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Disclaimer

The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website(s). Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

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

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