Fed Day trading almost always involves contraction of volatility in the morning session and expansion of volatility right around the announcement. Often, like today, the pick-up in volatility will trigger an afternoon trend.
In yesterday’s post, I highlighted my take on key resistance and support for today’s trading. These are outlined in boxes on the 3,000 tick chart. We see volatility contract through the Asian and European sessions, and shortly after the US open a small upthrust triggered in the resistance area. This brought price below yesterday’s high and signaled a down morning session. Later, at the Fed announcement, we get a nice spring off the morning low where support was anticipated. This propelled the market into new highs.
Yesterday, we looked at the three major markets (SPY, QQQ, DIA). They were helpful today during the Fed announcement. Note that only the Qs–identified as relatively weak yesterday–was the only market to fall below yesterday’s lows. The S&Ps and Dow held higher. This indicated that the spring was a good one and odds favored an up afternoon.
The market is clearly bullish. Weakness seen the rally of the last few days has been erased by today’s action. Any dip down tomorrow morning into the 1940 area would likely set up a buy opportunity.
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