Wednesday saw one of the widest intra-day swings on the S&P 500 index in the past five years with nearly a 60-point swing to close down only 3.5 points at 1522. Yesterday's trading saw the S&P 500 futures open with a gap-and-go morning to the downside and a precipitous 30-point drop to test last Monday's key reversal lows at 1595 before setting up an impressive W-pattern recovery by mid-afternoon. We posit that yesterday was a shake-out ahead of next Tuesday's October Federal Open Market Committee (FOMC) meeting; a meeting we have found to hold bullish implications, according to history.
Q: How have the S&P 500 futures historically performed beginning four days ahead of October FOMC meetings?
A: According to the 11 previous occurrences of this event, the S&P 500 has shown a very strong bullish edge that peaks 47 trading days after the event. The S&P 500 has rallied in 91% of the cases (10 for 11) by an average of 8.4%. The one decline is -1.0%. The overall return of the 11 cases is 7.5% projecting an index target of 1636.04 by Wednesday, Jan. 2, 2008.
If you would like to see more details of this historical edge, go to www.markethistory.com
Jay Pasch is a private futures and equities trader based in Minnesota. He may hold positions in the instruments mentioned in his trading ideas.
