Wednesday, January 27, 2010

Poor Closes Going Into A Fed Day

Wednesday is a Fed Day. I’ve written a lot about Fed Days and they’ve historically shown a positive bias. Despite this bias they represent an event that is often anticipated with some anxiety by market participants. This anxiety is natural as participants await potentially market-moving news. What’s interesting is that those times where anxiety is the highest have typically proven much more profitable. To demonstrate this I examined where the SPY closed within its daily range. I used SPY rather than SPX for this test because the daily range is typically more accurate with the ETF thanks to the staggered market opening. Below are all times like Tuesday where the SPY closed in the bottom 25% of its daily range prior to a Fed Day.

Stats here are strongly bullish. Last night’s Subscriber Letter examined the results in even more detail. It also showed what happens when SPY closes in the TOP 25% of its daily range on the day before a Fed Day. You may sign up for a free trial subscription by clicking here if you’d like access to that report.

You may also check the Fed Day label to see previous blog posts about Fed Days.

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