Saturday, October 6, 2012

A Study of Market Moves, VIX and FED meetings

At the FED's Sept Meeting day, market was overbought. But after the announcement, market shot up again. Could we anticipate 1 to 2 day market moves after the FED meeting announcement or minutes with an acceptable accuracy? I studied the SPX and VIX price movements at various (6) times of the FED meetings this year. The green lines represent statement announcement days and yellow lines represents meeting minute days.

Of the 6 times of statement announcements this year, at least 5 times came with large SPX moves within 1 or 2 days and VIX had large trading ranges every time.

If the SPX is in top of bollinger band but VIX is not in the bottom of its Bollinger band, the SPX could continue to spike higher to continue its trend (somewhat represented by the MACD as well).

There was no time that VIX was high enough to be at the top of BB around FED statement dates! It's probably because of the general uptrend this year.

Overall, it's not a clear picture to make solid judgement for forecasting FED impacts, with these set of indicators. FED meeting were market friendly without major disruptions. FED minutes created less volatility than the initial announcements.
Update: VIX always dropped within 1 or 2 days after the FED announcement which the price did not increase every time in the same time frame.

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