Similarities in Nov 4 and Sept 23 Fed Day Trading

Nov 4, 2009: 5:18 PM CST

There were eerie similarities in today’s Fed Day action and that of September 23 in form and structure.  Let’s compare these two days and focus mainly on price action and reaction.

September 23 SPY 5-min:

We’re looking just at the Price and the TICK as well as the 20 and 50 period EMA which help define price structure.

The general pattern for most Fed Days is to expect some type of morning gap and early movement and then expect the ‘lunch period’ or afternoon period in the hours prior to the 2:15 EST announcement to be tightly compressed as traders hold their breath for the announcement.

Then, the announcement comes and there’s often a three-thrust move that happens sometimes far too quickly for most traders – especially new traders – to get on board.  Losses can mount very quickly if you’re positioned the wrong way and caught in these currents. It is generally advised for newer traders to avoid trading the actual announcement for this reason.

Price rallied sharply on the announcement and then tried to support on the 20 and 50 period EMAs before plunging to new intraday lows at the close.  That was the main similarity in the prior Fed day and today’s.

November 4 SPY 5-min:

Today’s action was a better reflection, in that we had an overnight gap that slowly gave way to the tight range prior to the announcement, and then the market fell, rose, fell, rose… tried to support on the EMAs and then collapsed into the close.

I explained this pattern last night in more detail in the Idealized Trades subscriber report and even showed a more detailed chart of the prior Fed Day.  It’s amazing how similar those days were, particularly after the morning session.  September drifted up; today drifted down, but both compressed into a range prior to the announcement.

Just food for thought and an example of history repeating.

Corey Rosenbloom, CMT
Afraid to

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4 Responses to “Similarities in Nov 4 and Sept 23 Fed Day Trading”

  1. moneycometh Says:

    Thank you for the charted graphs. As they exemplify the truths surrounding the early afternoon time frame and why they are so trendy. They'll another appointed time, farewell.

  2. Red Dragon Leo Says:

    Looks like a rollercoaster ride Corey… a very scary one at that!

  3. Dan de Man Says:

    Looks and smells like a bear trap to me.

  4. Dan de Man Says:

    Looks and smells like a bear trap to me.