The Dow Jones Industrial Average (DJIA) rallied 0.18% during Monday's session to close the day at 11,972.25, gaining just over 21 points. This comes after the Federal Reserve, two days before a scheduled meeting, reduced the discount rate it charges on direct loans to banks, to 3.25% from 3.50%, and offered to lend money to an unprecedented list of firms.
U.S. stocks faltered Monday but remained off earlier lows in the aftermath of the distressed sale of Bear Stearns and the Fed cut. This was more apparent for DJIA, as it rallied on the day, than for the S&P 500 Index (SPX) which dropped -11.5 points, or 0.9%.
Q: How has DJIA performed in the past when, one day before a FOMC scheduled meeting, it outperforms the SPX by more than 0.75%?
A: According to the seven previous occurrences of this event, EventEdge indicates that DJIA has shown a very strong bullish edge that peaks 10 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, March 17, 2008) is Tuesday, April 1, 2008.
DJIA rallies in 100% of the cases (7 of 7) by an average of 3.7% relative to the close on the event date. The overall return of the 7 cases is 3.7%, which, based on the close of the DJIA on the event date (11,972.25), provides a target price of 12,415.22.
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.
