S&P 500 Index Futures (CME.SP) have rallied on four of the last five trading days and rallied 0.6% on its second successive gain during Tuesday's session to close at 1362.3. Due to the recent bullish run, S&Ps recorded a 'large'* five day gain of 4.0% as of Tuesday's close.
The big question is what the Fed will do during Wednesday's scheduled FOMC meeting after last week's emergency 75 bps rate cut. Most economists are expecting even more cuts, although probably not as large as 75 bps.
Q: How has CME.SP performed in the past when, during the first quarter, its five-day percentage change is 'large' on the day before a scheduled FOMC meeting date?
* A 'large' five-day gain occurs when the return is more than one standard deviation stronger than the average five-day percentage change measured over the last 30 trading days.
A: According to the 10 previous occurrences of this event, EventEdge indicates that CME.SP has shown a very strong bullish edge that peaks 13 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 (Tuesday, Jan. 29, 2008) is Friday, Feb. 15, 2008.
The S&Ps have rallied in 100% of the cases (10 of 10) by an average of 1.8% relative to the close on the event date. The overall return of the 10 cases is 1.8%, which, based on the close on the event date (1362.1), provides a target price of 1386.62.
The second graph reflects how CME.SP has performed in the past when we add the fact that it has seen two successive rallies to the event above. In this case, the edge is much stronger, but longer.
According to the seven previous occurrences of this event, CME.SP has shown a very strong bullish edge that peaks 23 trading days after the event with a projected date of Monday, March 3, 2008. CME.SP rallies in 100% of the cases (7 of 7) by an average of 3.3% relative to the close on the event date and provides a target price of 1407.05.
If you would like to see more details of this historical edge, go to www.markethistory.com
Ronish Patel is an analyst with MarketHistory.com.
