Chicago Board of Trade 10-Year U.S. Treasury Notes futures (TY) closed at 110.17 yesterday, 0.03% below their close on the previous day and yet still 1.75% above their close 5 days ago.
This strength comes at a time of weakness in U.S. stocks, with the S&P 500 index (SPX) closing at 1506.33 yesterday following a six-day decline of 3.55%. This weakness in the market drove the Chicago Board Options Exchange’s Volatility Index futures (CBOE.VIX) to their highest value over the past 25 trading days yesterday at 231.9.
According to the Market Information Machine (MIM), 10-Year Treasury Note futures make further gains after we see CBOE Volatility Index futures make new highs whilst the S&P 500 index is down.
Q: What happens to 10-Year U.S. Treasury Note futures when the S&P 500 index is down more than 1% across the previous 5 trading days and CBOE Volatility Index futures reach their highest value within the past 25 days?
A: According to the nine previous occurrences of this event, EventEdge indicates that T-notes have shown a strong bullish edge that peaks three trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the most recent occurrence of the event (Monday, 22 October 2007) is Thursday, Oct. 25, 2007. T-notes rally in 100% of the cases (9 of 9) by an average of 0.4% relative to the close on the event date. The overall return of the nine cases is 0.4%, which, based on the Monday close (110'17), provides a target price of 110'31.
If you would like to see more details of this historical edge, go to www.markethistory.com
Scott Murani covers European energy and commodity markets from London.
