S&P 500 Index Futures (CME.SP) dropped 0.3% on Monday to close the session at 1331.3. Despite the small loss, CME.SP recorded a 'large'* five day decline of 3% as Monday's decline was the fourth in five days. Furthermore, CME.SP also experienced a bearish MACD crossover, where the daily Moving Average Convergence Divergence indicator line (the difference between two exponential moving averages) crosses above the slower Signal line (an exponential average of the MACD line). Is it time for a rebound?
Note that the most recent Commitment of Traders Report (CoT) shows that hedgers hold a long position.
* Five-day percentage loss is more than one standard deviation stronger than the average five-day percentage change measured over the last 30 trading days.
Q: How has CME.SP performed in the past, omitting repeat occurrences within 10 trading days, when, during the second quarter, it records a 'large' five day decline and experiences a bearish MACD crossover while hedgers in the market are net long of futures contracts?
A: According to the 19 previous occurrences of this event, EventEdge indicates that CME.SP has shown a strong bullish edge that peaks six trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, April 14, 2008) is Tuesday, April 22, 2008.
CME.SP rallies in 89% of the cases (17 of 19) by an average of 2.1% relative to the close on the event date. The average of the two declines is 0.5%. The overall return of the 19 cases is 1.9%, which, based on the close of CME.SP on the event date (1331.3), provides a target price of 1356.59.
If you would like to see more details of this historical edge, go to www.markethistory.com
Also take a look at another bullish idea on CME.SP published earlier this month by clicking on the link below.
Ronish Patel is an analyst with MarketHistory.com.
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SP 500 Index Futures - Hedgers Go Astro - April 1, 2008
