Tuesday, December 13, 2011

When BKX Drops Hard The Day Before A Fed Day

One sector that is especially sensitive to Fed Days is the banking sector (BKX). BKX closed down on Monday about 2.5%. The study below looks at drops of 2% or more on the day before a Fed Day, and how the BKX responded on the Fed Day.

Instances are a little low here but the stats are overwhelming. Below I have listed all instances.

Not shown in all the above stats is that the average run-up was 4.2% and the average drawdown just -0.6% during the Fed Day. Overall risk/reward appears strongly favorable for BKX based on the limited sample size.

1 comment:

Daniel said...

Yet another great study, Rob. And if an exceptional result is generated, in this case the steepest loss during the period, to date, it will be a continuation of the odd anomalous patterns which various bloggers have been reporting. Extreme UP days, alternating with extreme this and that, odd gap patterns, extreme correlations, unusual daily volatility within tight weekly ranges, etc.

That extra information is as useful, in a well designed study, as the primary focus.

Thanks always for your insights.