"Drifting" before the FOMC on June 14

The Federal Open Market Committee of the US Federal Reserve System (FOMC) will meet again next week, on Wednesday, June 15, at 9:00 p.m. Moscow time to decide on the key interest rate level.

One of our research on the price movements of U.S. stocks and indexes before FOMC meetings - "Stock Market Anomalies: The FOMC 'Drift' Effect" - revealed the usefulness of FOMC "drift" in predicting the U.S. stock market and found that the U.S. indexes (S&P 500 and DJIA) and most of the tested stocks are tended to rise 24 hours before the Federal Open Market Committee meetings of the U.S. Federal Reserve. In addition, a stronger rise is observed 36 hours before the FOMC meetings.

And on May 4 this year, the effect worked out, especially when entering the market 36 hours before the FOMC meeting.

The S&P 500 and DJIA indexes and stocks of the U.S. companies that have shown the highest average profit per trade, total profitability and acceptable drawdown of no more than 20%, such as Apple, American Express, Visa and JP Morgan, can be considered as trading instruments.

Today we will focus on the U.S. stock index, which is the DJIA.

The DJIA lost 15%from the beginning of the year to the second half of May. By now it has already returned 5.4% and is still trading in a narrow price range of 32700 - 33300.

Strategy for entering the market:

1. Buy the DJIA on June 14 at 9 a.m. Moscow time.

* Close the deal on June 15 at 8:59 p.m. Moscow time.

* Place the Stop Loss protective order below the minimum of the previous trading day, i.e. June 13. 

 2. Buy the DJIA or top up the position on June 14 at 9 p.m. Moscow time.

* Close the deal on June 15 at 8:59 p.m. Moscow time.

* Place the Stop Loss protective order below the minimum of the previous trading day, i.e. June 13. 

Warning!

Financial market trading is inherent in high level of risk and can cause loss of investment capital. MarketCheese team is not responsible for the possible loss of your investment funds.