Wednesday, March 18, 2009

When The S&P Is Overbought Going In To A Fed Day

Wednesday is an FOMC meeting. In the past I’ve produced numerous studies examining how the market has performed surrounding these meetings. One scenario I have not yet shown is how the market has performed when it is short-term overbought go into the meeting. For this test I used a 2-day RSI to measure different levels of overbought.

(click to enlarge)

Over the last 19 years when the market has had positive momentum going into a meeting it has most often been able to maintain that momentum through the day of the announcement.


Anonymous said...

almost everyone is positioning for a market fall at this point

and you raise a possiblility that we may go up big yet again

so would today mark the blowoff top that leads to a pullback?

Rob Hanna said...

Good word - "possibility". While the market is "due" for a pullback I'm not seeing overwhelming evidence for either direct in the very short term.

I posted this today not just to raise the possibility of more upside, but to add another Fed study to the arsenal. Now traders can refer to it along with the others when Fed days are approaching.


Anonymous said...

You were right!!

yessir said...
This comment has been removed by the author.
yessir said...

How about what happens a few days out when: s&p is up > 10% from monthly lows, is below the 200dma, and closes near monthly highs on a fed day? Great reports as always!