Federal Funds Futures (CBT.FF) typically trade in a very small range, but have been on a significant 10-day upswing in tandem with the anticipation of the Congressional 'bailout' bill, and the huge injections of credit into the market by the Federal Reserve. On Friday Federal Funds Futures were up 'very' big* and gapped open higher, which means it opened above the previous day's high. Can we expect more of the same trend to continue?
Q: What has happened in the past when, in the fourth quarter, Fed fund futures go up very big after gaping open higher, omitting any repeat occurrences within 10 trading days?
A: According to the 27 previous occurrences of this event, EventEdge indicates that CBT.FF has shown a strong bullish edge that peaks 40 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Friday Oct. 3, 2008) is Monday, Dec. 1, 2008.
CBT.FF rallies in 85% of the cases (23 of 27) by an average of 0.2% relative to the close on the event date. The average of the three declines is 0.1%. The overall return of the 27 cases is 0.2%, which, based on the close of CBT.FF on the event date (98.59), provides a target price of 98.787.
*A 'very big' gain occurs when the one-day percent move is more than two standard deviations above the 30-day average one-day percent move.
The green arrows on the graph denote the T-Score, which takes into account the high number of occurrences of this event, which adds credibility to the edge.
To view this idea with our EventEdge® analysis tool and adjust its parameters, click here
Jeffrey Garceau is an analyst with MarketHistory.com.
