Japanese Government Bond Futures (TSE.JGB) dropped a 'very big' 1.0% on Monday, closing down 1.37 points, to end the day at 137.32. The Japanese Prime Minister, Yasuo Fukuda, recently resigned due largely to his inability to make headway in turning around the world's second largest economy. Japan's economy has been among the worst of the world's developed nations, however it has remained relatively free of a severe credit crunch or housing troubles recently.
JGB has seen a nearly three-month upward trend flatten out recently amid increasing volatility, and saw their 50-day moving average move above the 200-day moving average Monday, despite the 'very large' loss. Increasing volatility is likely influenced by uncertainty in government, but with core issues like credit and debt in pretty good shape, Japan's economy might be among the first to come out of its recent doldrums. What has happened in the past to Japanese Government Bond Futures when the 50-day moving average crosses above the 200-day moving average?
Q: What has happened in the past when JGB has seen the 50-day moving average cross above the 200-day moving average, omitting any repeat occurrences within 10 trading days?
A: According to the 13 previous occurrences of this event, EventEdge indicates that TSE.JGB has shown a 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 (Monday, Sept. 8, 2008) is Thursday, Sept. 18, 2008.
TSE.JGB rallies in 92% of the cases (12 of 13) by an average of 0.5% relative to the close on the event date. The average of the one decline is 0.2%. The overall return of the 13 cases is 0.4%, which, based on the close of TSE.JGB on the event date (137.32), provides a target price of 137.87.
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Jeffrey Garceau is an analyst with MarketHistory.com.
