The pre-FOMC trade this week has been, in our characterization, in the doldrums, as illustrated by the fractional losses on Monday and Tuesday and the two narrowest intraday trading ranges of 2016. Today’s market action saw a typical 2 PM mini-drama with the release of the statement followed by Janet Yellen’s press conference. It was at best a proverbial tempest in a teapot. The S&P 500 hit its intraday low shortly after the lunch hour, surged at 2 PM, retreated into the shallow red and then rallied to its modest 0.56% close, which was off its 0.80% intraday high.
The yield on the 10-year note closed at 1.94%, down three bps from the previous close.
Here is a snapshot of past five sessions in the S&P 500 with the Fed mini-drama highlighted.
Here is a daily chart of the index. Volume was only a tad higher than the two preceding days, which featured the lowest volume of the year.
A Perspective on Drawdowns
Here’s a snapshot of selloffs since the 2009 trough.
Here is a more conventional log-scale chart with drawdowns highlighted.
Here is a linear scale version of the same chart with the 50- and 200-day moving averages.
A Perspective on Volatility
For a sense of the correlation between the closing price and intraday volatility, the chart below overlays the S&P 500 since 2007 with the intraday price range. We’ve also included a 20-day moving average to help identify trends in volatility.
