How the FOMC has Changed
Every six weeks, for a number of years, we
could count on rather predictable patterns inside FOMC sessions. Price action
would generally drift upwards from mid-morning towards 2pm EST. The
interest-rate decision would be announced at 2:15pm. Price action would make an
initial move up or down… the first of three expected swings. Then it would
reverse and move counter to that initial surge. That was the second of three
expected swings. The third price move from there continued on in the same direction
as the first reaction off the news, and this third leg was usually (not always) a
dominant trend right into the closing bell.
ES 5-Minute Chart 03/18
The latest FOMC event session back in March
thwarted that widely-watched pattern of price movement. Initial reaction (1) off
the news was down. A counter-swing bounce (2) pushed price action back upwards.
When that failed, the next leg lower (3) was expected to dominate into the
afternoon stretch.
But it didn’t. Instead, a 4th swing began that
engulfed all three prior swings and prevailed into the closing bell. Was this
just an anomaly?
ES 5-Minute Chart 01/31
Going back to the Jan 30th FOMC event, we see the exact-same pattern of sequence
played out. Initial reaction was up from the news release. The counter-swing
lower held layered support, and the expected third leg took off higher from
there. Once it breached new session highs, looked like blue skies were the
limit. They weren’t. The fourth leg that developed engulfed all prior swings to
make another large-range move into the close.
Summation
Once may be an aberration. Twice may be a fledgling pattern. As usual we’ll
look for three swings past the FOMC news today for profitable trades. However,
let’s keep our eyes peeled for a potential fourth directional change which could
very well be the biggest move of all today… if not the entire week to date.
Austin Passamonte is
a full-time professional trader who specializes in E-mini stock index futures
and commodity markets. Mr. Passamonte’s trading approach uses proprietary chart
patterns found on an intraday basis. Austin trades privately in the Finger Lakes
region of New York. Click here to visit
CoiledMarkets