S&P 500 Snapshot: A Fed-Triggered "Tempest in a Teapot"

October 29, 2014

by Doug Short

Another FOMC day and another (yawn) Fed-triggered "tempest in a teapot". The S&P 500 opened higher and hit its 0.32% intraday high about 30 minutes later. The index then traded lower and spiked down at the 2PM release of the FOMC statement, which contained no surprises. Bloomberg's explanation was spot-on: Market Reaction Shows Hopes of Dovish Fed Go Unfulfilled. Predictably enough, CNBC takes a more dramatic spin: Surprisingly hawkish Fed sends markets reeling.

Reeling? Hmm. The 500's intraday low was -0.81% ... not my definition of "reeling." The index closed with a fractional loss of 0.14%.

The yield on the 10-year Note closed at 2.34%, up 4 bps from yesterday's close.

Here is a 15-minute chart of the past five sessions.

The chart below is a five-minute chart of the SPY ETF, which gives a better sense of investor participation. Note the spike in volume for the Fed dipsy-doodle. However, today's volume for the S&P 500 was only 7% above its 50-day moving average.

A Perspective on Drawdowns

How close were we to an "official" correction, generally defined as a 10% drawdown from a high (based on daily closes)? The chart below incorporates a percent-off-high calculation to illustrate the drawdowns greater than 5% since the trough in 2009.

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For a longer-term perspective, here is a pair of charts based on daily closes starting with the all-time high prior to the Great Recession.

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