Though Monday's session closed down on the day, buyers were lying in wait late in the day as the index channeled down intra-day to test the 20-day moving average resulting in a powerful late-day surge of buying on volume (see intra-day S&P futures chart below). Augmenting Monday's longer-range perspective on the S&P 500 index, we study yesterday's weakness with respect to Tuesday's FOMC policy meeting by asking:
Q: Over the course of its history, how does the S&P 500 index perform after recording a down day, one day ahead of an FOMC policy meeting?
A: According to the 22 previous occurrences of this event, EventEdge indicates that SPX has shown a strong bullish edge that peaks six trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Monday, Dec. 15, 2008) is Tuesday, Dec. 23, 2008. SPX rallies in 91% of the cases (20 of 22) by an average of 1.7% relative to the close on the event date. The average of the two declines is 0.6%. The overall return of the 22 cases is 1.5%, which, based on the close of SPX on the event date (868.57), provides a target price of 881.6.
To view and modify the event parameters defining this study, click here to launch the EventEdge® tool.
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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S&P 500 Index - Ben Meets the Winter Witch - December 15, 2008
