With Treasury volatility spiking in "panic" mode but equity volatility in "everything will be fine" mode, there is plenty of room for the algos to go wild around this afternoon's decision. As Nanex shows, [3] the last few years has seen lower and lower liquidity on Fed days as the pattern of liquidity collapse intraday provides just the ammunition for the instant buying-panic in the first 2 minutes after the decision.
Equity traders seem extremely complacent...
[4]
Which is bad news as liquidity has been tumbling on Fed days in recent years...
[5]
But there is only one pattern the algos know... Instantly buy! No Matter What!
[6]
But 1415ET-1430ET is the best cumulative performing period on Fed days...
[7]
Easy eh? Or will it be different this time... 7 years after ZIRP began?
Charts: Bloomberg and @NanexLLC
