Fed Chair Yellen Begins Two-Day Congressional Testimony

The Federal Reserve must testify before Congress semi-annually (twice per year), typically in late February and also in July. The two-day stints (one at the House and the other at the Senate) in testimony typically result in bullish days for the markets, especially the last few years with former Chairman Bernanke and now current Fed Chair Yellen promising to drop money from helicopters indefinitely.

For short-term day-trading, the idea is to enter the market long the day before the first day of testimony and then exit the long trade the day after the second day of testimony. This results in an 80% success rate. The period from the day before the testimony to the second day of testimony is typically up strongly as well, and also the two-day testimony itself typically results in an up move from the first day to the second day, but the period that bookends the overall testimony from the day before, to the day after is the highest percentage move.

Note that the incorrect July 2007 number occurred just before the October 2007 market top, and the incorrect read in February 2008 is when the financial sector bubble popped so the markets were not in a good mood back then. The incorrect read March 2012 was exactly as the markets were topping and rolling over. February's testimony in 2013 resulted in another up move for the markets. Chairman Bernanke had the magic touch; he was a rich uncle coming to town each time he testifies pumping the easy money joy.

The February 2014 testimony receives a rare split of the two days due to a snowstorm in Washington, DC, so the individual dates are used to assess the indicator and each testimony results in up days for stocks as Yellen flaps her dovish wings. Last July, one year ago, the same pattern occurs with a nice up move in stocks into the second day, a 12-point gain, but the day after the meetings ended, 7/17/14, the SPX fell from 1982 to 1955, a 27-point dump.

In February of this year, stocks float higher as Yellen promises more easy money at her testimony. Will stocks float higher over the next couple days as Yellen, Queen of the Doves, talks dovishly, or, will she become more hawkish promising a rate hike sooner rather than later throwing a wrench into the works?

7/15/15 – 7/16/15; 2100-2109/2127; Markets are Up; Correct

2/24/15 – 2/25/15; 2109/2114; Markets are Up; Correct

7/15/14 – 7/16/14; 1970/1958 (but up 1970/1982 for two days; the day after the meeting was a huge selloff); Markets are Down; Incorrect

2/27/14 (snowstorm rescheduled); 1844/1860; Markets are Up; Correct

2/11/14; 1796/1820; Markets are Up; Correct

7/17/13 -- 7/18/13; 1671/1684; Markets are Up; Correct

2/26/13 -- 2/27/13; 1488/1515; Markets are Up; Correct

7/17/12 -- 7/18/12; 1354/1377; Markets are Up; Correct

2/29/12 -- 3/1/12; 1372/1370; Markets are Down; Incorrect

7/13/11 -- 7/14/11; 1314/1316; Markets are Up; Correct

3/1/11 -- 3/2/11; 1327/1331; Markets are up; Correct

7/21/10 -- 7/22/10; 1083/1103; Markets are Up; Correct

2/24/10 -- 2/25/10; 1095/1104; Markets are Up; Correct

7/21/09 -- 7/22/09; 951/976; Markets are Up; Correct

2/24/09 -- 2/25/09; 743/753; Markets are Up; Correct

7/15/08 -- 7/16/08; 1228/1260; Markets are Up; Correct

2/27/08 -- 2/28/08; 1381/331; Markets are Down; Incorrect

7/18/07 -- 7/19/07; 1549/1534; Markets are Down; Incorrect

2/14/07 -- 2/15/07; 1444/1456; Markets are Up; Correct

Note Added Sunday, 7/19/15: As always, the stock market rallies through the Fed testimony.