The SPY tended to trade bullishly on the day before the FOMC interest rate announcement from 1/1996 - 11/2001, but has been bearish since then.

Trading the Odds posted an interesting study on the behavior of the ES on the day before the FOMC announces their decision on interest rates:

• from their study (S5), the key takeaway for me was the Profit Factor of 1.70 over the course of 156 trades...this peaked my interest, so i wanted to see if i could build a systemic trading model based on this behavior...
• their study uses the ES datastream and the FOMC interest rate release dates from 1990-present...i had somewhat easy access to the SPY datastream and the FOMC interest rate release dates from 1996-present, so i began there...
• my study identified the date which was 2 days prior to the FOMC interest rate announcement, purchased $100,000 worth of the SPY at the close of this day, and then sold it the following day (the day before the FOMC rate announcement) at the close...i did not use any other filters and i did not use any stops...
• my study came up with 106 trades and a Profit Factor of 1.42...there are less trades primarily because my study contains 6 less years of data compared to Trading the Odds study...the FOMC announces a potential change to interest rates 8x/year, which would amount to 48 additional instances over the 1990-1995 period...adding those 48 trades to my studies 106 trades, would make a theoretical set of 154 trades, which is pretty close to the 156 trades in the Trading the Odds study...this is close enough for me for a preliminary review of the SPY behavior...
• once i completed my study, the thing that jumped out at me the most, is the Equity Curve chart:

• the equity curve peaked at trade #46 (11/05/2001) and has been basing, with a recent downward bias since then...
• this equity curve suggests to me that while the SPY had a bullish bias on the day before a FOMC rate announcement from 1/1996-11/2001, there has been a bearish bias since then...
• even though the Profit Factor from my study is a bullish 1.42, it has been on the decline since 11/2001...
• even if i added the performance data for the 1/1990-12/1995 period, it would not change the equity curve from 11/2001-present...
• i will not be building a systemic trading model based on the behavior of the SPY on the day before the FOMC interest rate announcement...
• the purpose of this post is to add some color to the setup that Trading the Odds posted...it is not meant to discredit the great work they do...on a daily basis, i look forward to reading their research...it has been a great addition to my knowledge base and to my trading...
• the following is the list of dates that are two trading days prior to the FOMC interest rate announcement that i used in this study: