December Treasury bond futures (USZ) dropped over 1% during Tuesday's session after taking a break on Monday in observation of Columbus Day. USZ closed the day at 114-25, recording its fourth decline over the last five trading days. Subsequently, USZ recorded a 'very large'* five day decline on Tuesday. History suggests that more trouble lies ahead.
* Five-day percentage loss is more than two standard deviations stronger than the average five-day percentage change measured over the last 30 trading days.
Q: How has USZ performed in the past, omitting repeat occurrences within 10 trading days, when, during October, it declines by more than three quarters of a percent to record a 'very large' five day decline?
A: According to the eight previous occurrences of this event, EventEdge indicates that USZ has shown a strong bearish edge that peaks eight trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Tuesday, Oct. 14, 2008) is Friday, Oct. 24, 2008. USZ declines in 100% of the cases (8 of 8) by an average of 1.6% relative to the close on the event date. The overall return of the eight cases is -1.6%, which, based on the close of USZ on the event date (114-25), provides a target price of 112-30.
Note: Market History presented bond numbers as a percentage of 100. We calculated the actual market prices.
For more Market History go to www.markethistory,com
Ronish Patel is an analyst with MarketHistory.com.
