Wednesday's Dow Jones Industrial Average (DJIA.A) article suggested the bears were pressing their luck ahead of the CPI report, and after a down open they were pinned to the mat as the Dow rose 276.74 points, or 2.5% to close at 11,239.28. What's next?
Yesterday's stellar move on the Dow was undoubtedly due in part to the dramatic psychological chess move deployed by Wells Fargo during their earnings release, increasing their dividend in a bold move as the stock edged over the charting abyss. Still, we look at what history has to say about the Dow and yesterday's CPI report by asking:
Q: How has DJIA.A performed over the course of its history after closing up 'big' on the same day the CPI report shows Core inflation higher than expected?
A: There are only eight historical occurrences of DJIA.A trading up 'big' with Core inflation coming in higher than expected, the index showing a strong bullish edge that peaks 51 trading days after the event. DJIA.A rallies in 88% of the cases (7 of 8) by an average of 6.8% relative to the close on the event date. The one decline is 1.1% for an overall return of 5.8%, projecting an index target of 11,891.16 by Friday, Sept. 26, 2008.
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Mr. Jay Pasch is a private futures and equities trader based in Minnesota. He may hold positions in the instruments mentioned in his trading ideas.
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Dow Jones Industrial Average - The Bears Press Their Luck - July 16, 2008
