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Mar 17
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The BALD BULL
#26 The FED DRIFT
The Market’s Best-Kept Secret: How the "Fed Drift" Could Fund Your Kid’s College Tuition!
What if I told you there’s a 72-hour window before every Fed meeting where the stock market mysteriously drifts higher—and smart traders have been quietly cashing in for years? No gimmicks, no crystal ball—just a repeatable pattern backed by decades of data. This is the "Fed Drift", and if you’re not trading it, you’re leaving serious money on the table. Imagine stacking up enough gains to cover your kid’s tuition—without touching a single student loan. Sounds too good to be true? It’s not. In this must-read post, I’ll break down exactly how to trade around Fed meetings and how to turn Powell’s speeches into profit. Read on before the next rate decision—you don’t want to miss this play!
"I guess I should warn you: If I turn out to be particularly clear, you’ve probably misunderstood what I said."
| Alan Greenspan
(Former Fed Chair, Master of Confusion)
| Alan Greenspan
(Former Fed Chair, Master of Confusion)
The Fed loves to talk in riddles. Markets rally, then crash, then rally again—because no one actually understands what was just said.
# 26
The Mysterious Case of the Fed Drift:
Why Stocks Get Happy Before Jerome Powell Even Speaks!
Imagine this: You’re at a party, and the DJ hasn’t even shown up yet—but everyone’s already on the dance floor like it’s their last night on earth.
That, my friends, is the stock market 72 hours before a Federal Reserve rate decision—a little phenomenon known as The Fed Drift.
What the Heck is the Fed Drift?
First coined by Art Cashin, a legendary trader and director of floor operations at UBS, The Fed Drift refers to the strange but statistically proven tendency of the stock market to drift upward in the three days leading up to a Federal Reserve interest rate announcement.
It doesn’t matter if the Fed is about to raise rates, cut rates, or announce a mandatory nap time for all traders—stocks just seem to party early.
It doesn’t matter if the Fed is about to raise rates, cut rates, or announce a mandatory nap time for all traders—stocks just seem to party early.
What is the Fed, and Why Should You Care as a Trader?
The Federal Reserve (a.k.a. "The Fed") is the most powerful financial institution in the U.S.—and probably the world. It controls interest rates, money supply, and liquidity, meaning it can make stocks soar or crash with just a few words. As a trader, ignoring the Fed is like ignoring the referee in a rigged boxing match—they decide the rules, and if you don’t pay attention, you’ll get knocked out. Whether they’re raising rates (bearish), cutting rates (bullish), or just confusing everyone (neutral chop), their decisions move the market. Smart traders track Fed meetings, rate hikes, and policy statements to stay ahead of the game.
💡 Bottom line?
The Fed doesn’t just set interest rates—it sets the mood of the entire market.
💡 Bottom line?
The Fed doesn’t just set interest rates—it sets the mood of the entire market.
THE FED DRIFT. WHY?
The "Fed Drift" is a stock market phenomenon observed in the 72 hours leading up to a Federal Reserve interest rate decision, where equity markets—especially the S&P 500—tend to exhibit a bullish drift.
Here are a few theories:
🔹 Institutional Front-Running – Big money players bet early, assuming Powell won’t bring a financial flamethrower.
🔹 Algorithm Shenanigans – High-frequency traders love patterns, and they trade the Fed Drift like it's a cheat code in a video game.
🔹 Hopeium Overdose – Traders irrationally believe the Fed will whisper sweet nothings about "soft landings" and "transitory inflation."
🔹 Liquidity Magic – The Fed's aura alone makes money managers feel brave enough to hit the buy button.
Here are a few theories:
🔹 Institutional Front-Running – Big money players bet early, assuming Powell won’t bring a financial flamethrower.
🔹 Algorithm Shenanigans – High-frequency traders love patterns, and they trade the Fed Drift like it's a cheat code in a video game.
🔹 Hopeium Overdose – Traders irrationally believe the Fed will whisper sweet nothings about "soft landings" and "transitory inflation."
🔹 Liquidity Magic – The Fed's aura alone makes money managers feel brave enough to hit the buy button.
Origins & Observations
- The term was popularized by Art Cashin, a veteran trader and UBS director of floor operations at the NYSE.
- It describes a historical pattern where stocks tend to rise in the three trading days leading up to a Federal Open Market Committee (FOMC) announcement.
- This effect occurs regardless of whether the Fed is expected to raise, lower, or maintain interest rates.
A Wild Statistic for the Data Nerds
A study by the New York Federal Reserve found that 80% of total U.S. stock market gains between 1994 and 2011 happened in the 24-hour period surrounding FOMC meetings.
Let that sink in!
80% - Eighty percent.!!!
If you removed those Fed meeting days, the market would look like your uncle’s failed crypto portfolio.
Let that sink in!
80% - Eighty percent.!!!
If you removed those Fed meeting days, the market would look like your uncle’s failed crypto portfolio.
Why Does It Happen?
Several theories attempt to explain the Fed Drift:
1. Market Positioning – Traders and institutions may front-run expected policy decisions, driving up stock prices.
2. Liquidity Injection – The Fed and its communication strategy may contribute to a short-term boost in confidence.
3. Psychological Optimism – Markets tend to rally on the expectation that **the Fed will not surprise negatively.
4. Algorithmic & Institutional Trading – High-frequency trading firms and institutions might exploit this pattern for gains.
1. Market Positioning – Traders and institutions may front-run expected policy decisions, driving up stock prices.
2. Liquidity Injection – The Fed and its communication strategy may contribute to a short-term boost in confidence.
3. Psychological Optimism – Markets tend to rally on the expectation that **the Fed will not surprise negatively.
4. Algorithmic & Institutional Trading – High-frequency trading firms and institutions might exploit this pattern for gains.
Trading Implications
- Smart traders watch for this pattern to capitalize on short-term bullish momentum.
- Options traders may see increased premiums in call options ahead of FOMC announcements.
- Post-Fed reactions vary—the market can continue rallying or reverse sharply based on the Fed’s actual decision and guidance.
THE BOTTOM LINE
The Fed Drift is not guaranteed, but it’s a well-documented anomaly.
Savvy traders keep an eye on this 72-hour window for potential trading opportunities.
Savvy traders keep an eye on this 72-hour window for potential trading opportunities.
Here what is it looks like setting up ;-)
The FED MEETING Starts tomorrow 3.18 - 3.19.2025.
The FED MEETING Starts tomorrow 3.18 - 3.19.2025.
How to Trade Around the Fed Like a Shark! (Not a Minnow) 🦈
The FOMC meeting is like the Super Bowl for traders—except it happens eight times a year, and instead of touchdowns, we get market chaos, liquidity surges, and option volatility spikes.
The CME FEDWATCH TOOL is your insight into the odds for a rate move.
If you know how to trade these setups, you can ride the waves instead of getting crushed by them.
The CME FEDWATCH TOOL is your insight into the odds for a rate move.
If you know how to trade these setups, you can ride the waves instead of getting crushed by them.
SEE THE FED YEARLY MEETING SCHEDULE HERE
Your 3-Phase Playbook to trading around the Fed decision!
1️⃣ PRE-FED DRIFT:
The 72-Hour Sneaky Rally 📈
The 72-Hour Sneaky Rally 📈
Pattern:
Historically, the market tends to drift higher in the 72 hours leading up to the FOMC announcement. This is the "Fed Drift"—a real, statistically backed phenomenon.
How to Trade It:
✅ Look for bullish setups in major indices (SPY, QQQ) 3 days before the announcement.
✅ Consider short-term call options with 3-7 days until expiration for a quick momentum play. With experience , you can buy less time.
✅ Tech & financials tend to lead—watch XLK (tech ETF) and XLF (financials ETF).
✅ Be ready to take profits before Powell speaks—because the real volatility kicks in on announcement day.
Risk Warning:
❌ If bad macro news drops during this period, the drift can fail—use tight stops.
2️⃣ DAY OF ANNOUNCEMENT:
The Whipsaw Warzone
The Whipsaw Warzone
Pattern:
The first move is usually a fake-out. Algorithms push the market in one direction, only to reverse violently within minutes once Powell starts talking.
How to Trade It:
✅ Trade the post-announcement move, NOT the first reaction.
✅ Wait 15-30 minutes after the decision before entering trades—this avoids the "head fake" move.
✅ Watch for liquidity traps. If the first spike is weak and volume dries up, expect a reversal.
✅ Straddle options strategy: If implied volatility is reasonable, buying both calls & puts (straddle) before the announcement can capture big moves in either direction.
Risk Warning:
❌ If the Fed’s tone is ambiguous, the market may chop sideways and kill premium on options.
3️⃣ POST-FED ANNOUNCEMENT:
The Real Move 🎯
The Real Move 🎯
Pattern:
The market digests Powell’s words overnight and makes its true move the next day. If the Fed is dovish (bullish), markets can rally for weeks. If they’re hawkish (bearish), expect a sell-off to key support levels.
How to Trade It:
✅ Look for breakouts or breakdowns the next morning. This is often the real trend.
✅ If the move is bullish, look for continuation setups in high-beta stocks like NVDA, AMZN, and TSLA.
✅ If the market tanks, look for put options on weak sectors (small caps, high debt companies).
✅ Use Fibonacci retracements to find dip-buying or breakdown levels.
Risk Warning:
❌ If Powell’s message is unclear, expect chop for a few days before the market chooses a direction.
THE DOT PLOT
The Fed’s Crystal Ball (or Just a Fancy Guessing Game?)
The DOT Plot is the Federal Reserve’s way of showing where its members think interest rates are headed over the next few years. Each dot represents a Fed official’s rate projection, plotted on a chart that looks like a game of financial connect-the-dots. Markets obsess over this because it **signals whether the Fed plans to hike, cut, or hold rates steady. But here’s the catch—it’s not a promise, just a forecast, and history shows it’s about as reliable as a long-term weather report. Still, traders watch it closely to gauge the Fed’s stance on inflation, economic growth, and potential rate pivots.
📉 Translation:
If the dots move up, expect market panic. If they move down, traders start popping champagne.
FINAL THOUGHTS:
TRADE THE FED LIKE A PRO
- Pre-Fed Drift? Ride the optimism.
- Fed Day? Don’t get faked out.
- Post-Fed? Follow the real trend.
The FOMC is a trader’s playground—but only if you respect the rules of the game. Play it smart, and the Fed’s volatility machine can be your best money-maker.
Want to know why the financial system feels like a rigged casino where the house (aka the Fed) always wins? Then do yourself a favor and grab a copy of The Creature from Jekyll Island by G. Edward Griffin. This book is like taking the red pill in The Matrix—once you see how the Federal Reserve was secretly created by bankers for bankers, you can’t unsee it.
"The Fed was created by bankers, for bankers, under the guise of serving the public."
| The book exposes how Wall Street elites secretly designed the Federal Reserve to serve their own interests.
📖 3 reasons why this is a must-read:
🔹 It exposes the Fed’s origins—a secret meeting on Jekyll Island where the world’s richest bankers designed a system to control money (and you).
🔹 It explains how inflation is just a hidden tax—one that silently robs your wealth while making Wall Street richer.
🔹 It arms you with financial awareness—so you stop being a pawn in their trillion-dollar chess game.
If you trade, invest, or just don’t want to be financially blindfolded, read this book. It might just change how you see the world—and your money—forever.
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