Treasuries rebounded late Wednesday after spending much of the day under pressure from a stronger-than-expected July durable goods report. July actual durable goods orders were up 1.3% vs. a forecast of just 0.2%. The upside surprise hurt bonds early.
As a result, Ten-Year Treasury Note Futures (CBT.TY) opened the session down 'big', where the opening price represents a percentage decline that is more than one standard deviation stronger than the average. Nevertheless, TY rallied 0.2% and the day's end to close at 117. Let's turn to history.
Q: How has CBT.TY performed in the past when, after opening down 'big', it closes higher than the open on a day durable goods are higher than expected?
A: According to the 17 previous occurrences of this event, EventEdge indicates that CBT.TY has shown a very strong bullish edge that peaks eight trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Wednesday, Aug. 27, 2008) is Tuesday, Sept. 9, 2008.
CBT.TY rallies in 100% of the cases (17 of 17) by an average of 1.2% relative to the close on the event date. Which, based on the close of CBT.TY on the event date (117), provides a target price of 118-12.
The second graph takes the query a little further and asks the same question using the same price action conditions but adds the fact that actual durable goods more than doubled the forecast. In this case, according to the eight previous occurrences, TY rallies nine trading days later by an average of 1.3%, providing a target price of 118'16.
To see the first graph in our EventEdge® analysis tool click here.
Ronish Patel is an analyst with MarketHistory.com.
