Analysis of FOMC Session (by Drew)

FOMC meeting announcements offer incredible volatility and profit potential for the patient technician, and today's action was no exception. Ultimately, after a brief rally following the announcement, equities rolled over quite hard into the close, erasing most of the day's gains.

As a trader, it is always satisfying when you set a clear and concise game plan, stick to your rules, and follow through on a profitable trade. More importantly though, it is critical that one recognizes what exactly makes their profitable trades "successful", or on the flip side, "major losers". So on that note, I recommend this simple exercise. It will certainly improve your psychology, a critical aspect of becoming a consistently profitable trader, and your skill-set.

Take a sheet of paper, and draw three columns: Trade, What Went Right, What Went Wrong. In the first column, simply list the position, profit/loss, and length of time in the trade. The other two columns are self explanatory, just write down what you think you did right or wrong before, during, and as you exited the position. Although this seems trivial, doing this frequently will help you recognize specific details about your trading and mental state that you may have never thought about, or realized were actually important. Thus one can begin to identify behavioral patterns that have ultimately led to large gains, or even greater losses. Let me know if you have any questions, and feel free to share any strategies that you may use in the comments!

First up, we have a 1-day chart of the SPY. Notice how we have a highly bearish price/volume pattern form within one hour of the announcement.

One of the first things I discussed in the prior update was the likelihood of a short-term bounce into the 1060 area. With this in mind, I placed a couple of long positions at Tuesday's close, held firm throughout early Wednesday morning, and exited without hesitation (at the day's high) when the S&P 500 reached 1060. I have highlighted the original 15-minute chart from Tuesday's update, and a new one reflecting Wednesday's session. I'll say it once again, these types of price targets are typically very accurate.

   

Below is a 60-minute S&P 500 chart. We have a potential reversal forming here, but we will need to first hold 1043 before anything more can be said. I have highlighted the key breakout point in the case of confirmation. We have a great deal of "noise" right now from a technical standpoint, I highly reccomend patience over the next couple of sessions to see if prices can confirm this reversal pattern, or continue their intermediate correction.

We have a mixed picture on the daily charts, this often happens during market corrections/consolidations, and it can be very tiresome. Beginning with the S&P 500, the large cap index closed higher by one point. Wednesday's action printed a bearish Doji candle with prices closing well below the session highs. The early morning (and post-FOMC announcement) rally reversed precisely at the 20 day EMA, with prices closing right at the 50 day EMA. Continue to watch these two Moving Average supports during the next few sessions.

NASDAQ ended up closing lower for the session as the end of day selloff erased all of the session's gains, and then some. The NASDAQ lost about two points during the day to close at 2055, it traded up to the 50 day EMA at 2078 earlier in the session.