Monday saw the S&P 500 Index (SPX) intra day pattern form a Doji - a Japanese candlestick charting pattern where the open-close gap forms a small fraction of the daily trading range. The S&P 500 index closed at 1,372.54, off from its highest level during the trading day at 1,386.74. On the other hand the FTSE-100 index of UK stocks (FTSE) had a strong day of trading, rising 1.14% to close at 6,014.8 - the day's highest level. According to the Market Information Machine (MIM), when we have seen such behavior in the past, CBOT 10-Year U.S. Treasury Note futures (TY) are typically trading at a higher price two weeks later.
Q: What happens to 10-Year T-note futures when the S&P 500 Index experiences a Doji candle pattern, with its close falling more than 20% off of the day's high, whilst the FTSE closes at the day's highest price?
A: According to the 10 previous occurrences of this event, EventEdge indicates that CBT.TY has shown a very strong bullish edge that peaks 11 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, April 7, 2008) is Tuesday, April 22, 2008. The 10-year rallies in 100% of the cases (10 of 10) by an average of 1.5% relative to the close on the event date. The overall return of the 10 cases is 1.5%, which, based on the close on the event date (117-16), provides a target price of 119-08.
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.
